Marcellus Calls Calling

The stock market is at new highs after a four-month rally, gearing up for stronger economic growth once again.

But energy stocks have been in a correction since mid-December, with gas producers particularly weak amid another warm winter.

The long term drivers for higher natural gas prices remain in place. These include higher residential and industrial demand and booming pipelines exports to Mexico alongside growing shipments of liquefied natural gas. These will be offset only in part by increased output of associated gas as a result of stepped up oil drilling.

Spring should refocus traders from the winter’s lack of bite to long-range forecasts calling for another hot summer across much of the U.S. on the heels of last year’s record heat.

We remain particularly bullish on the beaten down shares of Marcellus gas drillers poised to benefit from improved market access in the wake of recent approvals of new pipelines in the region. Here are several options trades to make ahead of the coming rebound.

For #2 Best Buy EQT (NYSE: EQT), we’re recommending April $55 calls below $8. They recently traded near $6.90. We also like EQT’s September $55 calls below $10; they recently traded near $9.50.

You can also get long #3 Best Buy CONSOL Energy (NYSE: CNX)  via July $15 calls recently trading near $2.35; they’re attractive up to $3.50.

In the midstream space, Williams (NYSE: WMB) will be among the pipeline operators building some of that new Marcellus takeaway capacity, and remains a likely merger play after significantly rationalizing and simplifying its business over the past year. Buy WMB April $28 calls below $2.50; they were recently offered at $1.52.

Stock Talk

Daniel Long

Daniel Long

Still feeling good about the EQT April calls with oil prices and the overall market dropping?

Add New Comments

You must be logged in to post to Stock Talk OR create an account