Tuesday, November 1, 2011

Cheniere Energy (LNG) - Vol Pops on Doubling Stock

LNG is trading $12.01, up 4.8% with IV30™ up 24.6%. The LIVEVOL® Pro Summary is below.


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Cheniere Energy, Inc. (Cheniere) is an energy company primarily engaged in liquefied natural gas (LNG)-related businesses. The Company owns and operates the Sabine Pass LNG terminal in Louisiana through its 90.6% ownership interest in and management agreements with Cheniere Energy Partners, L.P. (Cheniere Partners).

This stock is up ~100% in the last week and today vol is exploding. Let's start with the order flow and make our way down to the vol and news. First, the company has traded over 23,000 contracts on total daily average option volume of just 6,723. Calls have traded on an 8.2:1 ratio to puts. The Stats Tab and Day's biggest trades snapshots are included (below).

Let's turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Ok, let's start with the gigantic move on 10-26-2011. Here's a news snippet from The Motley Fool:

BG Group out of the U.K. signed a huge LNG export deal that will be sent through the LNG terminal at Sabine Pass. The contract is for 3.5 million tonnes per year of LNG, a deal that is worth about $8 billion.

Source: Cheniere Energy Partners Shares Popped: What You Need to Know, written by Travis Hoium.

How big is $8 billion? Well, LNG revenue for the TTM is $295 million. Yeah, million... And today, the vol is up with earnings due out in three days AMC.

Let's turn to the Skew Tab snap (below).

Two things to note:
1. The front is elevated to the back (earnings vol)
2. Check out that vol spike in the 15 strike calls in Nov compared to the Dec 15 calls. A 20 point vol diff has opened up between them -- cool...

Finally, I've included the Options Tab for completeness.

Possible Trades to Analyze
Without getting too cute, that 15 strike vol diff seems interesting, though owning the upside vega in stocks like this can so often turn into painful bleeds of premium to zero. Considering this was a $6 stock a few days ago, that downside vol seems elevated, but it should be.

This is trade analysis, not a recommendation.

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