Huge, mysterious options bet has traders buzzing


According to CNBC.COM

A Huge, mysterious bet has traders buzzing.

“Someone is risking $1.5 million on the hope that shares of Southwestern Energy will rise nearly 15% in the next 3 months.

In a massive, unusual options bet, one institutional player is making a wager that Southwestern Energy (SWN) will have an especially energetic run between now and June.

On Thursday, one options trader bought 15,000 June 47-strike calls for about $1 each. This trade won’t make money unless Southwestern rises above $48 by the middle of June, which is some 15 percent above current levels.

If the stock closes below $47 at June expiration, the entire $1.5 million spent on the trade will be lost.”

Here is my take on this huge million dollar options trade. Southwestern Energy (SWN) is a pure play on natural gas prices (and the company happens to be the lowest cost natural gas producer) and with natural gas prices hovering at their highest level in four years one has to believe Southwestern Energy will report their best earnings in years on May 2nd. (This is because the company’s May earnings report will incorporate this winters high natural gas prices of $5 and $6)

Therefore the stock could easily hit $50 on an earnings pop especially by June, when the option expires. Even Better the options are currently selling for only $.70 cents (nearly 30% lower that what the huge option trader paid) and if Southwestern Energy goes to $50, you will make more than 320% on this option trade.

Will Meade