When investors try to gauge the market’s interest in a given stock, they can lean on recent buying activity as a reliable measure. However, this might not give them the entire picture. Buying or selling shares of a stock represents a relatively symmetrical bet and view of the underlying stock, and it might even be rebalancing or weighing for bigger asset managers out in the market with relatively tight mandates.
On the other hand, spotting unusual options activity in a stock can tell a completely different story for what might follow in the stock under consideration. Understanding that options offer a certain leverage multiplier can give investors a better idea of where the conviction lies for the stock in question.
Secondly, options have an expiration date, meaning that these leveraged bets must have a catalyst in mind, lest traders risk losing 100% of their investment.
Today, unusual call options activity has been spotted in shares of NextEra Energy Inc. (NYSE: NEE), which might be a two-way bet in the energy sector as well as a potential shift for interest in seeking a safe haven during the recent volatility breakouts in the broader S&P 500 index.
Being part of the utility sector carries a naturally low beta (volatility), amplifying the bets for these traders to seek sharper price action for their options bets. But what exactly can investors expect?
Momentum Play for This Utility Stock
A factor to consider in NextEra Energy stock recently might have incentivized these traders to take on leveraged bets through options on the stock’s potential upside move for the near future. Ending the month of March 2025, it was reported that up to $191,275 worth of call options were bought for this stock.
Taking leverage into consideration, this bet might be turned into a few million to show how much conviction there could be behind NextEra stock for the near future, not to mention the timing aspect of the trade due to expiration dates. One reason that could be driving this view is that NextEra Energy stock outperformed the S&P 500 by over 6% during the past month alone.
Considering that this options trade needs the timing to be on its side, this recent momentum is definitely an added benefit for the traders who decided to get into this view in the first place. If the past is any indication of the future, then NextEra stock could keep this momentum going into the future to help these traders and attract new momentum buyers.
Speaking of momentum buyers, investors can spot the 15.2% boost in holdings of NextEra stock coming from those at UBS Asset Management as of February 2025. Their net position is at a high of $926.3 million today, giving retail investors and these options traders a new whiff of confidence moving forward.
Beyond trader conviction, the fundamentals support this trade. Recent volatility breakouts in the S&P 500 make defensive stocks like this utility more appealing as a safe haven, further fueling the rally.
Where’s the Upside Potential for NextEra Energy?
According to the consensus price target of $85.9 per share set by Wall Street analysts today, NextEra Energy stock has the potential to rise by as much as 21.2% from its current price, reiterating the excitement present in these new institutional investors as well as the options traders and their leveraged bets.
This double-digit upside would also make NextEra stock flirt with its 52-week high, getting close to it again to further reiterate the momentum that helps the stock be a pick in today’s volatile market. On top of this upside and continued momentum, investors also benefit from potentially owning NextEra Energy stock today.
Being in such a stable industry and business, NextEra Energy management is able to offer a payout of up to $2.26 per share today via dividends, which at today’s prices would translate into an annualized dividend yield of as much as 3.2% to cushion inflation rates in the United States and volatility in the broader markets.
All of this optimism for the stock is not limited to these options traders or institutional buyers. There are subtle clues investors can pick up from the broader market that will lead them to a potentially higher price in NextEra Energy for the coming months, and valuation metrics can discover this.
NextEra stock trades at a price-to-earnings (P/E) ratio of 21x, which is a significant premium to the rest of the utilities sector’s average valuation of 15.3x today. While some investors may call this expensive and filled with downsides, seasoned investors will remind them that the markets will always pay a premium for stocks that they expect will outperform their peer group and the broader S&P 500 as well.
Where Should You Invest $1,000 Right Now?
Before you make your next trade, you'll want to hear this.
MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis.
Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list.
They believe these five stocks are the five best companies for investors to buy now...
The article "NextEra Energy Stock Sees Spike in Bullish Call Activity" first appeared on MarketBeat.
