Big options bets done forward of Mirant-RRI understanding

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NEW YORK (Reuters) - Recent options wake up on shares of Mirant Corp (MIR.N) suggests traders were awaiting a estimable move in the batch before to the proclamation that Mirant would take a opposition appetite company.

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Mirant jumped 18.9 percent to $12.76 on Monday, one day after it concluded to take over RRI Energy Inc (RRI.N).

The partnership will emanate one of the largest U.S. eccentric appetite producers during what has been a severe time for appetite companies as new signs of mercantile liberation have not resulted in a co-ordinate liberation in appetite markets.

RRI Energy shares were up scarcely 13.9 percent to $4.50.

Both bonds rallied on Friday forward of the deal"s announcement, with Mirant gaining 3.9 percent and RRI rising 5.3 percent.

Options marketplace wake up shows investors were awaiting something to occur with Mirant, even if it was misleading what, as options investors took new bets on big moves in Mirant whilst RRI Energy didn"t see vital options play.

"We have been saying surprising volume for weeks" on Mirant, pronounced Jon Najarian, a owner of web report site optionMonster.com. "The gossip has been out there for a prolonged time."

The majority active options on the underlying batch were the Apr $15 calls and Jun $15 calls whilst the put seductiveness was really low, Najarian said.

Some options traders seemed to be betting on higher sensitivity in the shares.

"Options wake up on this batch has been generally active given last week, but they (the bets) are for a some-more longer antiquated options, and the partnership headlines is one matter that positively doesn"t hurt," pronounced Jud Pyle, arch investment strategist at Options News Network, a multiplication of choice selling organisation Peak6 Investment in Chicago.

Pyle pronounced complicated shopping transformation occurred in Mirant options on Wednesday with a retard of rounded off 5,000 Jan 2011 $10 straddles traded.

The sum reward was about $3.25 per straddle, a gamble on sensitivity that requires the financier to buy a call and a put choice at the same set upon cost and death date. The customer is seeking for poignant transformation in possibly citation in the stock. The pragmatic sensitivity on Mirant shot up to 42 percent compared to the stock"s 30-day chronological sensitivity of thirty percent.

A sum of 5,369 Jan 2011 $10 calls and 5,122 puts at the same set upon were traded, according to choice analytics organisation Trade Alert.

Pyle pronounced investors who paid for these straddles will have income if the shares dump next $6.75 or convene higher than $13.25 before to the Jan 2011 options expiration, suggesting they are promissory note on sensitivity to flog in.

(Editing by Padraic Cassidy and Leslie Adler)

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