My previous strangle on LNG expired out of the money. I wrote a new one on Monday.
music selection: “Bad Motor Scooter” — Montrose
Cheniere Energy is a natural gas price arbitrage play. Gas is cheap in North America. They are building liquification facilities (one complete) to ship the gas to more expensive markets. The company has sold forward most of its production and is well insulated from commodity price pressure. They should make a lot of money going forward.
I sold LNG160429P00035000 for 2.15 and LNG160429C00045000 for 0.26 a contract. I hold 200 shares long at a cost basis of 30.60. Both contracts will be in force for my preferred holding period of 40 days. The put pays 56.05% annualized and the call pays 5.27% annualized. The put has 8.38% downside protection against the spot price at the time it was written. The call is unlikely to expire in the money but would pay an additional 14.40 in capital gains if it did.
Devour your prey raptors!