Constellation Energy Stock Today: Consider A Long-Term Options Play With Call Butterflies
Constellation Energy (CEG) is trying to bottom out after a sharp sell-off in recent weeks. So, let's consider a long call butterfly LEAP trade in Constellation Energy stock.
The LEAP stands for securities targeted for long-term equity anticipation.
As market participants become more comfortable with higher volatility lately under sweeping changes in federal government under the Trump administration, let's widen our view on the broad market and pay attention to key monthly price levels. We also focus on strong stocks over time. This brings me to a unique setup: the LEAP-style long call butterfly on Constellation Energy stock.
↑ X How Long Do Market Corrections Last? These Signs Show When To Get Back In.Constellation Energy Stock: The Trade
A LEAP option trade goes out well into the future. This allows us to position ourselves in the direction of what we perceive the longer-term trend will be.
A long call butterfly combines a long call spread and a short call spread that share the same short strike price, or a price in which the option holder may decide the exercise the option.
In the long call butterfly (positioned for upside in the details below), if Constellation Energy stock holds steady or moves upward and stays below the middle strike price, then we capture $8,000 less the cost of the call butterfly.
The trade currently costs $1,645 per set of contracts. Here's the trade:
- Buy to open 1 CEG March 20, 2026, call with a 170 strike price.
- Sell to open 2 CEG March 20, 2026, 250 calls.
- Buy to open 1 CEG March 20, 2026, 330 call.
Profit Potential
The long call butterfly holds a current debit of $1,645, and this represents our total risk. There is no margin requirement. So, the total highest potential profit is $8,000 (distance between strikes x 100) less the cost ($8,000-$1,645=$6,355).
It is extremely rare to collect all this premium on both sides. But we might be stepping into just this kind of backdrop of action in Constellation Energy. Expect wide trading ranges that nevertheless see the stock hold support at key chart levels on a month-to-month basis.
Trading advice: Set price alerts for both the top and middle strikes on the butterfly. I like to consider a 200%-300% profit if the market can deliver much higher returns.
Which Way Is The Stock Market Headed Now? Read This Column Each Day
Trade Management
Now, let's identify key chart levels in Constellation Energy stock. First, I see the relative resistance zone sits around 240. The relative support should hold near 170, right at the lower end of the call butterfly trade structure.
The strategy provides several choices to exit the trade. I will discuss only two. First, sell the butterfly when the value of the butterfly moves into your target parameters, particularly once the middle strike price of 250 is tested. Second, sell the butterfly when your risk parameters for loss is breached.
One more point. The beauty of this butterfly? It's deep in the money currently and has a tremendous amount of time value attached.
Anne-Marie Baiynd is a 25-year veteran trader of stocks, options and futures and is the author of "The Trading Book: A Complete Solution to Mastering Technical Systems and Trading Psychology." You can find her on X at @AnneMarieTrades, Sirius Business Radio, Investors Business Daily, the Benzinga Pro platform as well as Topstep on YouTube
YOU MIGHT ALSO LIKE:
Find The Best Growth Stocks Via This Highly Stringent Screen
Want More Options Trading Strategies? Go Here
