Cheniere pullback draws put sellers
David Russell | firstname.lastname@example.org
optionMONSTER's tracking systems detected the sale of about 6,000 July 14 puts for $1.40. There was no open interest in the strike before the session began.
The investor is now obligated to buy shares in the natural-gas tanker stock for $14 if they close below that level on expiration. Including the credit earned today, their entry price would be $12.60. If it remains above $14, they will keep the $1.40 and the options will be rendered worthless.
LNG is up 4.7 percent to $14.47 in midday trading. It more than doubled between mid-December and late April but then proceeded to decline by more than 25 percent before bouncing today.
Investors are sharply divided over the future of the company. The bulls envision major growth as the cheap U.S. natural-gas supplies spur decades of natural-gas exports, while the bears worry about its heavy debt load and negative book value. The result is a big short interest and rich option premiums.
LNG's implied volatility is about 75 percent, compared with its 59 percent historic volatility. This suggests that options are expensive, a condition the investor is exploiting by selling puts. (See our Education section)
Overall option volume is almost triple the daily average so far today.