Cheniere Energy, Inc. (LNG) Bucks Sector Swoon on Icahn Stake

Carl Icahn has increased his stake in Cheniere Energy, Inc. (LNG)

by Alex Eppstein

Published on Dec 8, 2015 at 10:59 AM

While energy stocks are getting crushed at home and abroad, Cheniere Energy, Inc. (NYSEMKT:LNG) is charging higher on reports that activist investor Carl Icahn has upped his stake in the firm to 13.8%. At last check, the shares have added 3.6% to hover near $43.69 -- though they remain short-sale restricted after plummeting as much as 13% and hitting a new annual low of $38.71 yesterday.

In today's options pits, LNG calls hold a slight advantage over puts. However, in recent weeks, this has been anything but the case. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 3.21 puts for each call during the last two weeks. The corresponding put/call volume ratio outranks 90% of comparable readings from the past year.

Echoing this is LNG's Schaeffer's put/call open interest ratio (SOIR) of 0.70, which sits in the 85th percentile of its annual range. Put simply, speculators targeting options set to expire in the next three months have been unusually drawn to puts over calls.

Option traders aren't the only ones with doubts about LNG. In fact, 24.5 million shares are sold short, equivalent to 14.3% of the equity's total float. At the stock's typical trading volume, it would take more than eight sessions to cover these bearish wagers.

Of course, Cheniere Energy, Inc. (NYSEMKT:LNG) isn't the only company that's won the affections of Icahn. As recently as yesterday, he revealed a 12.1% stake in Pep Boys-Manny Moe and Jack (NYSE:PBY), and the auto parts retailer's board said an Icahn bid could ultimately yield a "superior proposal" -- relative to a competing offer from Bridgestone.

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