Trader is looking to ride Teekay higher

By David Russell,

Shutterstock photo

Teekay LNG Partners pulled back to key support yesterday, and one bull is jumping on board.

optionMONSTER's Heat Seeker tracking system detected the purchase of about 2,500 May 40 calls on the natural-gas transport stock for $0.62. An equal number of May 35 puts was sold at the same time for $0.42. Volume was more than double open interest in both strikes.

The position cost about $0.20 to open and will simulate a long position in the company, which operates a fleet of tankers that ship liquefied natural gas. It will profit if TGP pushes toward or above $40 and lose money below $35. If it's between those two levels on expiration, both options will expire worthless.

TGP The stock made an all-time high of $41.50 in mid-March and then drifted sideways. It fell 5.41 percent to $38.31 yesterday after announcing it would raise capital.

The drop brought TGP back to roughly the same level that offered resistance in previous months and to its 50-day moving average (black line on chart at right). Some chart watchers may consider that an attractive entry point and want to get long around this level.

The bullish trade pushed total option volume in the name to 85 times its daily average.

One word of caution: TGP is organized as a limited partnership (LP), which can have unusual tax consequences. Investors may want to understand them before owning the units.

(Chart courtesy of tradeMONSTER)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: TGP

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