Teekay LNG Partners (TGP) is the third largest independent operator of Liquid Natural Gas (LNG) carriers, following behind Mitsui O.S.K Lines (private) and NYK Line and just ahead of Golar LNG (GLNG). (Teekay LNG Partners Investor Day Presentation (pdf)) In addition to LNG, Teekay also provides transportation services for Liquefied Petroleum Gas (LPG) and crude oil.
In Teekay's Q1 2012 earnings call (pdf) held on May 18, 2012, the company noted that following the Japan earthquake, Japan's LNG imports have increased 24% year-over-year. The company also noted it and its joint venture partner Marubeni acquired six LNG carriers from Maersk during the quarter.
On a negative note, as presented in the Teekay LNG Partners Investor Presentation held on June 18, 2012, Teekay indicated there is a potential for softening in the spot/short-term charter rates once the order book starts to deliver in the 2013/2014 time frame. On a positive note, Teekay expects Chinese LNG imports to double by 2015 and India is expected to turn to importing LNG in order to make up for a projected domestic shortfall.
Teekay popped up on a search for companies with high option volume as shown below:
(click to enlarge)
Also found for the high option volume search were bio-pharmaceutical company Affymax (AFFY), bio-pharmaceutical company Orexigen Therapeutics (OREX), apparel company True Religion Apparel (TRLG), oil exploration/production company Cobalt International Entergy (CIE) and coin/DVD kiosk company Coinstar (CSTR).
The 2012 Jul 37.5 call option had significant volume as well as the 2012 Aug 35 put option as shown below:
The call option action was for the opening of new positions which has a bullish appearance. The put option volume appears to be a mixture of opening and closing of positions with more opening than closing, which has a bearish tint.
Teekay's stock price spiked at $42 in May and has pulled back its 200 day moving average in the $36 range as shown below:
Support appears to be in the $30 range, so entering a long position for the company might be a little premature at this point. Teekay's Price-to-Earnings (P/E) ratio of 29 and Price-to-Sales ratio of 5.4 are tolerable, but less than desirable.
With Teekay's support in the $30 range, potential for softening in 2013/2014 and less-than-desirable P/E and P/S, an investor might consider entering a married put for the company, as a married put position provides for unlimited upside, yet protects from a large drop in stock price. A married put may be entered by purchasing a put option against a long position in the stock. Longer-term married put positions are generally desirable, as the cost for the "insurance" per day is less expensive as compared to the shorter-term alternatives.
Searching for married put positions for February of 2013 revealed the following:
A married put with the 2013 Feb 40 put option purchased for $9.20 looks attractive with a maximum potential loss, excluding dividends, of 11.8%. So, even if the price of the stock goes to zero, the maximum potential loss is 11.8%. With expected dividend payments, the maximum potential loss is reduced to 7.7% and the resulting profit/loss graph for one contract, including dividends, is shown below:
If the price of the stock increases to above the $40 strike price of the put option, income methods as described by RadioActiveTrading.com may be employed for further reduction of risk.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
