Why Picking A Call Option Of NextEra Energy, Inc. (NEE) Is Best Strategy?

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NextEra Energy Partners, LP, which is which is a spin-off from the parent company NextEra Energy, Inc. (NYSE:NEE) to operate ten winds and solar energy projects, announced on Thursday that it has procured $406 million through its Initial Public Offering (IPO) at the rate of $25 per share. NextEra Energy Partners had earlier floated the IPO offering 16.3 million shares, priced within the price band of $19-$21, but later revised it towards the range of $23-$25.

NextEra Energy

Proposal Rejected

Other than this, a Reuters report highlighted this week that Energy Future Holdings has rejected NextEra Energy, Inc. (NYSE:NEE)’s $2.3 billion proposal to restructure it. Out of the total $2.3 billion, NextEra Energy had committed to contribute $1 billion from its end, while the remaining was to be given by the group of investors, towards the restructuring plan that could have given NextEra a dominant stake in the Energy Future Intermediate Holdings (EFIH). However, EFIH chose to elect proposal from a different group of investors, who are holding its unsecured bonds over the offer made by NextEra Energy, Inc. (NYSE:NEE).

Attractive Call Strategy

Amid the latest developments, FMHR trader Jon Najarian had identified unusual call activity in NextEra Energy, Inc. (NYSE:NEE) last week and had suggested the call strategy for the stock. In an intervention on CNBC, Najarian stated:

“I could be in it up to another three weeks or so. Some of the subscribers have taken a little off, but just like Pete said, from last week when the entry is right here to where it’s run to today, it’s been a very strong move. I think folks that trade this option, rather than the stock, they were buying the option under $3, traded over $5.50. So instead of buying a $100 stock, you can buy a $5 option. You get idea of the leverage you are getting there and a lot of people took advantage of it.”

Halcyon Asset Management, run by John Bader holds 1.03 million shares of NextEra Energy, Inc. (NYSE:NEE), the position was upped by 59% during the first quarter of 2014. While another hedge fund Electron Capital Partners, led by James Shaver sliced its position in this company by 48% during the same period to 82,202 shares.

Disclosure: none

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