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)

Jul 25, 2016 at 11:03 AM
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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.

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