Golar LNG Limited (USA) (GLNG) Bulls Cash In On Winning Options Bets

Golar LNG Limited (USA) (GLNG) options are flying off the shelves, after the energy firm agreed to a joint venture with Schlumberger Limited (SLB)

by Alex Eppstein

Published on Jul 25, 2016 at 11:03 AM

Golar LNG Limited (USA) (NASDAQ:GLNG) has rocketed 13% higher at $18.42 -- and options traders are running wild -- after the energy transportation firm formed a joint venture with Schlumberger Limited (NYSE:SLB). The project will work toward developing low-cost gas reserves to liquefied natural gas (LNG), with Golar taking a 51% stake.

With GLNG stock exploding, some bullish options traders appear to be locking in paper profits ahead of August expiration. Right now, calls are crossing the tape at eight times the expected intraday clip, with the in-the-money August 17.50 strike in the lead. Based on data from the International Securities Exchange (ISE), a sizable portion of these contracts are being sold to close.

Speaking more generally, calls have been the options of choice in recent weeks. GLNG's 10-day call/put volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is a top-heavy 6.48. Moreover, this ratio outranks nearly three-quarters of all others from the past year.

The analyst crowd is similarly bullish toward GLNG. Six analysts rate the stock a "buy" or better, versus one "hold" and not a single "sell." Plus, the consensus 12-month price target of $35.68 is nearly double the shares' current trading level.

This optimism is a tad surprising, considering Golar LNG Limited (USA) (NASDAQ:GLNG) has surrendered 55% on a year-over-year basis. Based on that technical performance, one would expect Wall Street to follow the bearish lead of short sellers, who have shorted nearly 15 million shares -- or 18.4% of GLNG's total float, and five times the stock's average daily trading volume. In fact, it's possible some of these shorts have been purchasing calls to protect their bearish positions against sharp upside moves, like the one we're seeing today.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

A Schaeffer's exclusive

6 Sectors for Summer

Access your FREE insider report before it's too late!



NEW! Explore Schaeffer’s Partners' deals and get connected to top online brokerages with deals tailored exclusively for our readers.  Get answers to your questions regarding transfer fees, commission rates, programs and available discounts related to online trading services.

MORE | MARKETstories

Huge New Legal Marijuana Market Has Shortage Crisis
250 million Europeans have access to medical marijuana. There's already a shortage....
Tiffany Stock Drops as Takeover Talks Dissipate
LVMH was to acquire Tiffany & Co in a billion-dollar deal
Coty Stock Glows Up with Possible Kardashian Cosmetics Line
The trendy cosmetics company is in talks with reality TV star Kim Kardashian West over a line of beauty products
The Big Bankruptcy You Should Be Afraid Of
Porter Stansberry is making a concerning prediction.