Cheniere Energy, Inc (LNG) is operates liquid natural gas related businesses. The company’s stock is currently trading around $39.75 in a 52 week range of $13.85-$40.85. The stock has been raging higher rallying over 111% year to date and over 144% in the past 12 months. LNG is set to report their most recent quarterly earnings today after the close. Recent earnings day performance in LNG has been relatively weak with the stock selling off 3 of the past 4 quarters. On average, the stock moves 2.4% on earnings day. Despite LNG’s weakness on earnings day we have seen a lot of bullish options order flow recently. On Tuesday a trader bought 10,000 of the LNG Jun 34-44 bullish risk reversals for $0.51. This is a very bullish bet that comes on the back of several other bullish blocks bought over the past two weeks. With a very strong chart we believe that this bullish order flow signals trader’s strong conviction to the upside in LNG. Currently the options market is implying a move of around $1.60 by November 8th expiration giving us an upside target of $41.35 by Nov 8th expiry. Using this target we can now set up an options strategy.
Trade: Buying the LNG Nov 8th Weekly 40.5-41.5 Call Spread for $0.25
Risk: $25 per 1 lot
Reward: $75 per 1 lot
Breakeven: $40.75
