As this week gradually ends, I came across a stock making new highs in which I found an incredible opportunity to make profit with call options. Trading stock options is not without its attendant risk and the fact that you stand to lose all of your investment if you make wrong plays is one of the reasons why you need to look for options that places the odds in your favor. Trading the options of stocks making new highs is a smart way to put the odds in your favor because stocks making new highs usually have a better chance at rising higher than stocks that have been sitting dormant for a while.
NRG Energy, Inc. (NYSE:NRG) with its market capitalization of $12.72B is an integrated wholesale power generation and retail electricity company in the United States. NRG is a wholesale power generator engaged in the ownership and operation of power generation facilities; the trading of energy, capacity and related products; and the transacting in and trading of fuel and transportation services. NRG is a retail energy company engaged in the supply of energy, services, and sustainable products to retail customers in competitive markets through multiple channels and brands.
Making New Highs
The chart above shows how shares of NRG Energy have gained 32.39% from $28.49 to $37.72 in the year-to-date period. You can easily see that the stock has been unrelenting in its bullish ascent as it surpasses its 20, 50 and 200-day moving averages. You will observe that the stock has made 17 new highs in the last one month while gaining 11.04% in the same period.
I am optimistic about the growth prospects of this company based on what forward estimates project. For instance, revenue is expected to grow by 26% this year while earnings are on track to increase by as much as 262.80% this year. The forward P/E (2014 estimates) of 18.1 and Number 1 “Strong Buy” Zacks rank also confirms the bullish thesis on this stock.
Expanding Operations through Acquisitions
2014 has been a year of strategic acquisitions for this company but I am very excited about the acquisition of substantially all the assets of Edison Mission Energy (EME) and the competitive retail electricity business of Dominoes Resources, Inc. (NYSE:D).
EME is a unit of Edison International and the purchase of this asset has been touted to have the potential to increase NRG Energy’s generation capacity by 8,043 MW. In addition, NRG Energy will also gain the ownership of EME’s wind generation assets, which has a total generating capacity of 1,724MW.
The acquisition of the COMPETETIVE retail electric business of Dominion Resources is both growth and strategically motivated. As a matter of strategy, the acquisition effectively eliminates a competitor in the market in order to increase NRG’s market share and allow it to compete on a grander scale with peers. From the growth perspective, the acquisition of the retail electric business will automatically add about 500,000 customers to NRG’s clientele and extend the company’s operation into eight U.S states.
How to Trade NRG Options
I am bullish on the growth prospects of this company and you will find it very difficult to uncover fundamentally sound reasons to bet against this company. I recommend the NRG Jan 2015 39.000 call (NRG150117C00039000) at its current asking price of $1.85.
— Daily Option Alerts