Credit: Shutterstock photoCheniere Energy is usually a thinly traded energy stock, but yesterday it was near the top of the Heat Seeker.
The call buying began early and continued throughout the session, focusing mostly at the March 8 strike. They fetched $0.20 in the morning but rose to $0.30 by the close. Volume surged past 11,400 contracts, more than 75 times open interest when trading began.
LNG rallied as the calls hit and ended the session up 5.79 percent to $5.67.
The company transports liquefied natural gas, which explains its ticker symbol. It's an extremely expensive business involving large tankers and terminal facilities, so LNG has always required huge amounts of debt to finance its operations. Last quarter, it owed 35 times more than it had cash on hand.
Like many leveraged companies, such as DryShips, LNG traded at extremely depressed levels after the 2008 mortgage crisis. Since then the credit market has improved, and many of these companies have doubled and tripled many times over.
Recent trading action suggests a similar trend could now be taking hold in LNG. The stock exploded higher on Nov. 11 after saying it was working on a deal to export natural gas to China. It tore through the $5 level that had been resistance since late 2008, then pulled back and found support above $5.
Furthermore this expected to be an extremely cold winter. One scientist who has accurately predicted weather patterns now anticipates 25 years of cold weather: a mini ice age created by reduced solar activity. If anything close to that pans out, the United States could become a major exporter of natural gas to places like Western Europe.
On top of all that, short interest stood at about 30 percent of the float in LNG at the end of November. That could drive the stock higher into the New Year.
Overall option volume in LNG was 51 times greater than average yesterday, with calls outnumbering puts by more than 105 to 1.
Disclosures: I own LNG shares.
(Chart courtesy of tradeMONSTER)
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
