Unusual Options Activity: Next Era Energy (NEE)

Utility giant Next Era Energy (NEE) has seen shares slide to a price point where it’s bounced higher on previous occasions the past few months. One trader sees that happening again.

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  • That’s based on the August $75 calls. With 92 days until expiration, over 6,020 contracts traded from a prior open interest of 178, for a 34-fold rise in volume. The buyer of the options paid about $2.15 to make the trade.

    With shares down near $72.50, the option is just slightly out-of-the-money. However, prior declines to the low $70 range have led to a bounce higher, either to the mid-$70 or low $80 point within the span of just a few weeks.

    Shares are also trading near oversold levels on a technical basis, similar to the trend before prior moves off of this near 52-week low as well.

    Action to take: At current prices, the dividend yield of 2.1 percent is a good starting point for income investors.

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  • Given how shares could bounce meaningfully higher in just a few weeks however, the August call options look like a reasonable trade.

    Investors may move into utilities as a hedge against fears of a further decline in areas like tech, or shares may simply be in a somewhat volatile range and have merely gotten into the low range. Either way, the August calls look like a reasonable bet for moderate to high returns in a utility company.


    Disclosure: The author of this article has no positions in the stock mentioned here, but does not intend to make a trade on this company after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.

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