Is Cheniere Energy running out of gas?
David Russell | firstname.lastname@example.org
optionMONSTER's Depth Charge monitoring system detected the sale of 14,000 September 31 calls for $0.58 and the purchase of an equal number of September 20 puts for $0.48. Volume was more than 5 times open interest at both strikes, indicating that new positions were initiated.
Owning puts ensures a minimum sale price, in this case $20, while writing calls obligates the trader to unload shares at a maximum level, in this case $31. He or she probably owns the natural-gas tanker's stock and is using the strategy, which is known as a collar, for protection.
LNG is down 0.87 percent to $26.21 in afternoon trading but has appreciated more than 700 percent in the last three years. It's been ripping higher as the company prepares for a boom in natural-gas exports from the United States. But its momentum has been slowing in recent months, which could be leading some chart watchers to believe that the stock is losing its mojo.
The collar lets the investor time a potential exit until September--possibly for tax purposes--while staying in in the game for new highs LNG rebounds. (See our Education section for other hedging techniques.)
Total option volume in the stock is quadruple the daily average so far today, according to the Depth Charge.