Utility provider Sempra (SRE) is up 6% over the past year, far underperforming the overall market, and the utility sector in general. One trader sees shares trending higher into the spring.
That’s based on the April $85 calls. With 92 days until expiration, 10,155 contracts traded compared to a prior open interest of 242, for a 42-fold rise in volume on the trade. The buyer of the calls paid $1.40 to make the bullish bet.
Sempra shares recently traded for about $77, so the stock would need to rise by $8, or about 10%, for the option to move in-the-money.
That’s well within the stock’s trading range over the past year, as shares have slid in recent days following a series of wildfires in California have sent shares well off their 52-week high of $95.77.
Operationally, the utility has struggled with growth. Revenues fell 17% in the past year. And Sempra operates in the California market, far from where new data centers to power AI tools are being built.
Action to take: Investors may like shares as an oversold short-term play given the current wildfires in Southern California, but more fires may pose a risk to the stock for now.
For traders, the April $85 calls are a better way to play a news-based selloff in shares right now. If the stock bounces higher in the coming weeks, the options could see high double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
