Stock / Symbol: [private_monthly]Cheniere Energy / LNG [/private_monthly]
Price at trade post: $9.61
Option Strategy: covered strangle
Reasoning: We've been looking for a play on Natural Gas and believe we've found a good one in [private_monthly]LNG [/private_monthly]. We're using a covered strangle which is essentially a covered call + a naked put. The result is a breakeven point about 11% lower than the stocks current price and a trade probability of about 75%. IMPORTANT: because we're also selling a put, we'll be obligated to purchase another 100 shares at $8 per share should the stock be trading under that level by Aug expiration. Of course, the chance that we'll have to buy the shares at $8 is currently just 25%.
Max Risk: $1669
Max Reward: $131 or 7.8% by Aug 19th
Profit Range: $8.69 +
Max Profit at: $10 +
Trade Details:
[private_monthly]
BTO 100 shares of LNG
STO -1 LNG Aug11 10 Call
for a net debit of $8.95 per share (GTC, limit)
then,
STO -1 LNG Aug11 8 Put
for a net credit of $0.25 per contract
Requirements:
Cost/Proceeds $869
Option Requirement $800.00
Total Requirements $1,669
Estimated Commission $35.85
[/private_monthly]
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