Jon Najarian appeared on the Fox Business Network program The Claman Corner on Monday. Asked by host Liz Claman, “What’s the trade?” Jon gave three natural gas stocks that export the commodity to Europe — and one of them has been the consistent target of massive unusual call buying to the tune of 9-figure purchases for more than a year. But why would the smart money target natural gas stocks? The question you should really be asking is…
Why is Natural Gas So High?
Natural gas is up more than 21.5% this week. Source: Tradenomics
Energy is getting hit from all sides:
- The conflict in Europe rages on
- The Nord Stream Pipeline project is essentially dead, with Russia accusing the British of carrying out a “terrorist attack” on the NS1 and NS2
- OPEC+ has cut back production of Crude by 2M barrels per day
With Russian energy off the table, Europe is being forced to rely more now than ever before on liquified natural gas — a commodity that the U.S. is (as of 2022) the biggest worldwide exporter of.
Monthly U.S. liquified natural gas exports have soared over the past 6 years. Source: EIA
And the U.S. isn’t just amping up its exports of LNG — it’s been quietly increasing its production of LNG every year.
This animation doesn’t even account for the dramatic increase in 2022. Source: Enerdata.com, animation by Market Rebellion
As a result, LNG has become a key ingredient to the U.S. energy economy. For good reason — natural gas is responsible for many applications including heating homes and businesses. Natural gas is also the cleanest-burning fossil fuel.
All three orange LNG lines begin a parabolic ascent in 2016. Source: Reuters
So with export levels at record highs, and production at record highs, why is natural gas up 21.5% this week? Because even with the increases shown above, it’s not enough to satiate the global demand for this highly sought after form of energy. But where there’s a price hike — there’s a stock market trade that pairs with it.
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Jon Najarian: Trade EQT, LNG, and GLNG
While gas prices have cooled somewhat, Jon Najarian believes that it’s natural gas — the kind you use to heat your home, not the price at the pump — that will have consumers on the back foot this Winter.
“When people have to start paying for heating, they’re going to notice the difference in natural gas prices.”
And it isn’t just American consumers who will feel the effects — Europe, who is left with indefinitely higher energy demand without Russia in the picture, must continue to rely on natural gas exports to get them through a winter that some believe will be abnormally cold.
That’s why Jon Najarian likes these three natural gas stocks — they don’t just work with natural gas, they export it.
All three picks have performed extremely well YTD. Source: Google
Despite having an average YTD return of 91.6%, Jon believes there’s more upside to come as supply/demand imbalances continue to take hold. And he isn’t the only one…
9-Figure, Multi-Year Unusual Options Activity in EQT LEAPS
While little-known stocks like EQT have remained under the radar to most investors, Market Rebellion has been along for the ride for more than a year.
These three alerts from our premier service, UOA Elite, depict one option trader’s journey in rolling highly-profitable LEAPS in EQT. In May of 2021, the trader bought 50,000 January 2023 LEAPS for an average price of $3.845 per contract, absurdly far above the open interest of just 136 contracts. This trade cost a grand total of $19.225 million dollars. They continued building on the position with a few smaller purchases.
Then, in March of the following year, they cashed in their entire position, which by now had amounted to 75,000 call options, worth nearly 3X what the trader initially paid. But this wasn’t the end. This trader used the profits to buy 100,000 of the next year’s $40 strike calls, completely dwarfing the open interest of 246! This trade’s total value: A whopping $79.8 million dollars. And even then, the trader wasn’t done!
Two months later, they rolled a portion of their options once more to an even higher $65 strike, cashing in 40,179 of the previous options at roughly a 32% price appreciation.
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The Bottom Line: This is Why We Follow the Smart Money
This trade is essentially the gold standard of unusual options activity.
- A trade that could only be made by the wealthiest of the Wall Street elite.
- A trade that costs millions, and millions, and millions of dollars.
- A trade that just repeats, over and over again.
- A trade in which the number of contracts bought are more than 100X the open interest.
If not for unusual options activity, this trade may have flown under the radar, and the rich would continue to get richer with no one the wiser. Instead, thanks to Market Rebellion’s unusual options activity, those brave enough to follow the smart money were able to exploit the backroom trades of the wealthiest institutions.