NextEra (NYSE: NEE) is the largest electric utility holding company by market capitalization.
Last Friday, it briefly surpassed Exxon Mobile (NYSE: XOM) – a huge feat for the energy newbie, considering XOM has moved between the first and sixth largest company in the world for the past 20 years.
The world’s largest energy companies have traditionally come from the oil and gas sector – Chevron, Schlumberger, BP, to name a few. But that’s when oil was in high demand, running for $147.27 a barrel. Today, 12 years later, a barrel will run you under 40 bucks.
As people turn to more sustainable energy sources and COVID-19 picks at oil’s demand, the sector’s worth is decreasing.
Take the Energy Select Sector SPDR ETF (NYSE: XLE), for example. It houses the world’s largest oil and gas companies, and after tapping out at $101.52 in June 2014, it has plummeted to less than $30 today – dropping a whopping 70%.
Meanwhile, renewable energy companies like NEE are running sky-high.
Forget your typical oil trades – today, we’re going long-term.
(But if you want to hear about short-term plays, then click here to learn about the newest fast-money strategy I have my eye on.)
I’m going to show you a way to profit on these fast-growing renewable energy companies over the next three years, while the sector shoots skyward.
And I have all of the details on how to use this long-term strategy right here…
Profit on Renewable Energy Using LEAPs
Now, I called NextEra’s move higher weeks ago.
You know the phrase “the proof is in the pudding?” Well, NextEra shooting past Exxon is the proof.
Should NextEra’s bullish trend continue, it will very soon hold the top spot as the largest energy company in the U.S. Its market cap is currently $142 billion, up from $136 billion just seven weeks ago.
And the reason that the company propelled up is all thanks to renewable energy.
NEE reduced its energy generation cost 50% by adopting natural gas. It is also revamping operations to include solar power generation capabilities.
But this isn’t the only player to look at. Back on August 14, I wrote about some of the top contenders that are moving the energy market.
Let’s revisit some of the best renewable energy stocks that are on the rise…
- NextEra Energy (NYSE: NEE)
- Vestas Wind Systems (OTC: VWDRY)
- Renewable Energy Group (NASDAQ: REGI)
- Invesco Solar ETF (NYSE: TAN)
- iShares Global Clean Energy ETF (NASDAQ: ICLN)
- Invesco Wilderhill Clean Energy ETF (NYSE: PBW)
Every one of these stocks is setting either a multi-year or an all-time high.
Now, buying and holding these stocks is a great way to diversify your portfolio.
The leader of the pack, NEE is currently trading at $290 a share. For a single share, that is pretty steep. That’s why I wanted to show you the best way to trade these renewable energy stocks using options.
We recently talked about how to profit on some of these companies using shorter-term options. But renewable energy is the future – so, let’s say you want to play the long game.
For longer-term positions, I use LEAPs, which are “Long-term Equity Anticipation Securities” options. These allow you to control a stock for up to three years at a fraction of the cost of a stock share.
With NEE currently trading at $290 a share, 100 shares would cost you a whopping $29,000.
But by using LEAPs, you could buy a January 20, 2023 Call for $49 per share controlled (or $4,900) and leverage the stock at 17%.
This LEAP expires on January 20, 2023, giving you over three years to profit on this high-flier alternative energy company at a fraction of the cost of stock.
And since LEAPs are long term, you can consider selling out-of-the-money (OTM) (1-2 strikes higher than the price of the stock) calls each month to collect some “rent” on your trades, reducing the cost basis.
Renewable energy is a great candidate for a long-term strategy like LEAPs. But if you don’t want to wait three years for a profit, then listen up…
I just discovered a four-day profit cycle that’s outperformed the S&P 500 by nearly 17% in the first eight months of 2020.
You heard me right – four days. By playing this cycle, you could double your money in under 96 hours.
Click here to learn how.
Talk soon,
Tom Gentile
America’s #1 Pattern Trader
