Call Options Or Put Options On GasLog (GLOG)?

| August 29, 2012 | 0 Comments

GLOG OptionsGasLog (GLOG) owns and operates a fleet of liquefied natural gas (LNG) carriers.  

GLOG has two wholly-owned carriers in operation with eight more on the way.  They also operate and manage eleven other LNG carriers.

GLOG currently trades for $11.17 per share.  The shares are up 27% from the 52-week low of $8.76.  However, the shares are down 16% from the post-IPO high of $13.34.    

Is this an opportunity to buy call options on GLOG before LNG shipping takes off?  Or should you buy put options on GLOG as competition heats up?

The bulls make a convincing argument…

GLOG’s a relative newcomer to the shipping world.  They IPO’d on the NYSE on March 30th.  Their unique focus on the transportation of LNG gives them tremendous upside.

It’s no secret the US has a glut of natural gas.  And we’re just a few short years away from exporting this cheap and abundant natural resource around the globe.

Well, there’s only one way to get it there… liquefy it, load it onto special tankers equipped to handle LNG, and ship across the ocean.  And GLOG has a fleet of the most technologically advanced and cost-efficient LNG carriers around.   

At this point, GLOG is already a profitable operation.  Last quarter they made 4 cents per share.  And they’re expected to begin paying an 11 cent per share dividend in the fourth quarter.

What’s more, GLOG is on the verge of going through a period of explosive growth as they bring an additional eight LNG carriers online over the next few years. 

In fact, they’re expected to collect more than $1.3 billion between 2015 and 2021 on the contracts they already have in place.  And they still have two more carriers to contract out!

GLOG plans to return a good chunk of their profits to investors.  Analysts are expecting the dividend payouts to reach 52 cents per share by 2014. 

In short, GLOG is an income investors dream come true.  I think we’ll see GLOG soar as investors pile into this stock in anticipation of owning this cash producing machine for years to come.  

But the bears have a compelling case as well… 

GLOG stumbled out of the gates.  Put simply, this is another IPO debacle.  It’s not as public as Facebook (FB) but it’s troubling nonetheless. 

As you know, a stock’s post-IPO performance goes a long way toward shaping investor sentiment toward a stock.  And GLOG is an unmitigated disaster.

The IPO priced below the expected range.  The shares immediately dropped and finished their first day of trading down 11%.  And the stock has never traded back to the IPO price.   

What’s more, the lockup period expires on September 26th.  That’s when the company insiders can begin selling their stock.  If they choose to cash in their shares, the market could be flooded with even more shares of an underperforming stock.

More importantly, short sellers will likely load up on this stock in anticipation of a big move lower following the expiration of the lock up period.  And that spells trouble for GLOG in the short term.

If you think the bulls are right, take a look at buying the GLOG February 2013 $12.50 Call for around $0.60. 

If you think the bears are right, take a look at buying the GLOG November 2012 $10 Put for around $0.45.

***Editor’s Note***  One of our good friends at Hyperion Financial is releasing a short-term trade in the technology sector tomorrow.  These ‘flash trades’ are typically great opportunities to make some quick cash.  Click here to see what he’s got cookin for tomorrow!

Good Investing,

Corey Williams

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Category: Call Or Put Options?

About the Author ()

A former banking executive, Corey Williams is the Chief Options Strategist and co-editor of our well-known daily newsletter, Options Trading Research. Corey’s extensive experience with options goes all the way back to his days in corporate finance. It was this decade in banking where Corey discovered the most important skill an options trader can have– the ability to analyze a company or sector to determine its likely future direction. And now he’s brought this background, experience and love of options to Options Trading Research, the unique daily e-letter devoted exclusively to helping individual investors profit from the very lucrative options market.