Cheniere Energy is a volatile stock, and one investor is trying to take advantage of that.
optionMONSTER's monitoring systems detected the sale of 4,000 January 7 calls for $1.92 today. An equal number of September 7 calls were bought at the same time for $0.25 against existing open interest, which suggests that a short position was rolled from one strike to the other.
The transaction was probably the work of an investor who owns the stock and is using the options as part of a covered call strategy. Rolling the position earned a credit of $1.67 and will keep investor in the trade for an additional four months.
LNG, which is down 1.61 percent to $7.33 in midday trading, has been on a wild ride in the last year. It surged from $2 last September to about $12 in late May and has been drifting lower since. The company, which operates liquefied natural-gas tankers, is heavily shorted and carries a giant debt load.
All the volatility has inflated option premiums, which makes it attractive to own stock against short calls. If the investor continues to roll the position, he or she could earn about 42 percent on an annualized basis, even if LNG moves sideways.
Their main risk is downside in the stock, and the trader relinquishes the right to profit if shares rally. (See our Education section)
Overall option volume is triple the daily average so far today.
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