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LNG – Shares in Cheniere Energy, the developer of onshore liquefied natural gas (LNG) terminals, gained 7.5% to close at $28.87 today. Earlier today the company said it was exploring a possible sale of its 92% owned Sabine Pass terminal in Louisiana to “enhance value for its shareholders.” Not surprisingly, option volume powered to 27 times the normal level as calls traded on their heaviest volume in our records today. Implied volatility also rose in step to reflect about 34% more price risk to Cheniere shares than they have shown historically. Option traders are eyeballing the September contract for some resolution to this possible terminal divestment, with what may be long call spread positions between strikes 35 and 40. The trader in this instance would position for upside by buying the September 35 calls for $2.10 while controlling trade costs via the sale of 40 calls at $1.00. The remaining debit means the trade generates profit for the buyer once Cheniere breaks past $36.10, but the sale of the upper-strike call creates a ceiling on the upside – in other words, today’s trader isn’t looking for the sale of Sabine Pass to result in a break of the standing $41.99 high anytime soon. Shares in Cheniere Energy were down 11% for the year to date heading into today.

LOW – Shares in Lowe’s, the world’s second-largest home-improvement retailer, bounced nearly 5% higher to $24.74 today, despite reporting a one-third decline in its Q4 net income. The company’s CEO said he did not anticipate a recovery in the housing market until next year. Option volume advanced to 6 times the normal level, with a largely bearish bent to equities trading second-guessing that counterintuitive move higher in share price. It appears as though some traders may have looked to enter long put spread positions between the 22.50 and 25 strikes, selling the lower strike for 30 cents toward the purchase of the 25 strike at $1.30. Elsewhere the July contract was in focus as traders looked to sell volatility, possibly going short the 25.00 strangle while calls one strike higher traded to the middle of the market at $1.05.

ABK – News emerged this afternoon that a consortium of leading banks has struck a deal to rescue municipal bond insurer Ambac, good news reinforced by S&P’s decision to maintain the Triple-A rating of both Ambac and MBIA. Shares in Ambac gained 14.6% on the development, closing at $12.28. Earlier today, option traders were positioning long volatility via the 10/12.50 strangle, paying a $3.15 premium – more than a quarter of the current share price – to profit from a break above $15.65 or below $6.85. The mood has now shifted to the upside, it seems, with traffic in the 12.50 calls picking up sharply this afternoon.