National Grid Plummets 2.85% Amid Share Issuance Fears—Is This a Buying Opportunity?

Summary
• National Grid (NGG) trades at $77.49, down 2.85% from $79.76
• 7.08M new shares issued under 2025/26 Scrip Dividend Scheme
• Technical sentiment remains 'Buy' despite sharp intraday drop
• Intraday range: $77.49 (low) to $78.19 (high)

Today’s selloff in National Grid has sent shockwaves through the utility sector, driven by a massive share issuance tied to its dividend program. With the stock trading near its 52-week low of $59.35, investors are scrambling to assess whether this is a panic-driven dip or a strategic entry point. The move contrasts with a broader sector that remains cautiously optimistic, though NGG’s unique capital structure and regulatory dynamics are amplifying short-term volatility.

Scrip Dividend Scheme Sparks Share Dilution Fears
The 2.85% intraday drop in National Grid stems directly from its announcement of 7.08 million new shares under the 2025/26 Scrip Dividend Scheme. While the company frames this as an alternative to cash dividends for shareholders, the market has interpreted it as a dilutive move that could pressure existing equity value. The issuance—priced at $74.23 per ADR—arrives at a vulnerable moment, with NGG already trading near its 52-week low. Analysts note that such large-scale dilution often triggers short-term profit-taking, especially in a sector where earnings growth is already constrained by regulatory caps and capital-intensive infrastructure needs.

Electric Utilities Sector Mixed as NextEra Energy Gains
While NGG’s sharp decline stands out, the broader electric utilities sector shows mixed signals. NextEra Energy (NEE), the sector’s top performer, rose 0.055% intraday, highlighting divergent investor sentiment. NGG’s move appears decoupled from sector-wide trends, driven instead by its unique capital structure and regulatory environment. The UK-based utility’s exposure to European energy markets and its role in transatlantic infrastructure projects further differentiate it from U.S.-focused peers like NEE and Duke Energy (DUK).

Options Playbook: NGG20260220C80 and NGG20260220P75 Lead the Charge
• Kline Pattern: Short-term bullish trend, Long-term bullish
• MACD: 1.02 (above signal line 0.769), Histogram: 0.25 (positive divergence)
• RSI: 76.56 (overbought territory)
• Bollinger Bands: Price at 77.49 (near lower band 74.69)
• 200D MA: 72.80 (price above by 4.6%)

Technical indicators suggest NGG is in a short-term consolidation phase after its sharp drop. The 200-day moving average at $72.80 offers critical support, while the RSI’s overbought reading hints at potential mean reversion. For options traders, two contracts stand out:

• NGG20260220C80 (Call):
- Strike: $80, Expiry: 2026-02-20
- IV: 19.02% (moderate), Delta: 0.315 (moderate sensitivity), Theta: -0.023 (time decay), Gamma: 0.0736 (high sensitivity)
- Turnover: 2,375 (high liquidity)
- Payoff at 5% downside (73.62): $0 (out of money)
- Why it works: High gamma and moderate delta make this call ideal for a rebound scenario, with sufficient time decay to offset price volatility.

• NGG20260220P75 (Put):
- Strike: $75, Expiry: 2026-02-20
- IV: 18.53% (moderate), Delta: -0.282 (moderate sensitivity), Theta: -0.017 (time decay), Gamma: 0.0718 (high sensitivity)
Payoff at 5% downside (73.62): $1.38 (in the money)
Why it works: This put offers downside protection with high gamma to capitalize on further declines, while moderate IV ensures cost efficiency.

Aggressive bulls should consider NGG20260220C80 into a bounce above $78.19.

Backtest National Grid Stock Performance
The backtest of NGG's performance after an intraday plunge of -3% from 2022 to the present shows favorable short-to-medium-term gains. The 3-Day win rate is 52.99%, the 10-Day win rate is 56.20%, and the 30-Day win rate is 53.85%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest period was 1.35%, which occurred on day 55, suggesting that NGG has the potential for recovery and even surpassing its pre-plunge levels.

NGG’s Volatility Play: Position for a Rebound or Defend Against Further Dips
National Grid’s sharp decline has created a high-conviction trading environment, with technicals still favoring a long-term buy despite short-term pain. The 200-day moving average at $72.80 and the 52-week low at $59.35 represent critical psychological thresholds to monitor. While the scrip dividend issuance introduces near-term uncertainty, the sector leader NextEra Energy (NEE) remains up 0.055%, suggesting broader utilities demand remains intact. Investors should prioritize NGG20260220C80 for a rebound or NGG20260220P75 for downside protection. Watch for a break below $74.69 (lower Bollinger Band) or a regulatory update on the scrip dividend program.