STNG Puts - Biden sanctions induced rally which provides good entry for shorts
[I wrote this dd](https://www.reddit.com/r/wallstreetbets/comments/198ip3b/stng_part_2_of_my_4_part_red_sea_shipping_series/) some time ago where I bought STNG calls and it worked out [reasonably well,](https://www.reddit.com/r/wallstreetbets/comments/1992whu/stng_president_selling_i_am_selling_21k_gain_on/) I've been in and out of this name a few other times for small gains. Like all good cyclicals, shipping companies add a ton of supply when they are in a boom and that inevitably creates the conditions for a bust. I think the recent sanctions Biden put gave a rally that provides a good opportunity for shorts looking to participate in what will likely be a bad year or two stretch for product tankers.
[Recent sanctions of russian fleet](https://preview.redd.it/5ahl8wh7rlde1.png?width=1160&format=png&auto=webp&s=83772b0a39909e968af2098c7a4fdfe3da93f5c5)
I think it likely Trump undoes some of these sanctions. I've read that the legal mechanism that Biden used makes it hard for Trump to undo the sanctions until March, but shipping companies are pretty willing to commit crime if they think they can avoid enforcement. In any case, there is a huge wall of shipping supply coming online in 2025. 2% of the DWT (3.2) of the fleet was sanctioned but there is expected to be 7% increase in DWT (12) delivered in newbuilds in 2025.
https://preview.redd.it/35qp86xgrlde1.png?width=1025&format=png&auto=webp&s=049752ae6cb44b8b1fa8df8b1d6fad778a5ca085
A lot of this move has gotten front run, and without the recent rally I would not be looking to short, but given the fact that the recent rally erased 2 months of losses I think it possible STNG can bleed down another -20% again pretty rapidly, especially if Trump undoes the recent sanctions or otherwise makes it known that they will not be enforced
STNG has been sort of flailing around lately, aggressively buying back shares at prices that the market immediately sells through, and they also spent part of their buyback money on DHT last quarter which was unexpected. Here is what they had to say about that
https://preview.redd.it/sanjxoborlde1.png?width=1251&format=png&auto=webp&s=d0a8bc4344c4ee05a88e1260967d41fb29c5f1fd
[DHT chart](https://preview.redd.it/rs1gumh1slde1.png?width=2439&format=png&auto=webp&s=6289c4ccf02b5ac92f129ec1df126a7183b495b0)
https://preview.redd.it/7yz5hxisrlde1.png?width=1229&format=png&auto=webp&s=1f7903a6c1e67bc8640a4403af79f619fd6ce851
Whenever I see share repurchases at prices well above recent prices I think the company is likely making a mistake. You want to see repurchases put in a bottom.
[A small decrease in rates drastically impacts earnings](https://preview.redd.it/nnh7i00gtlde1.png?width=1212&format=png&auto=webp&s=a2edc18fabe47c6c4554cc6f16b73a71d00e159d)
[STNG's latest shipping rates](https://preview.redd.it/qu14w0sjtlde1.png?width=1172&format=png&auto=webp&s=681efb65cf666d3527d19a49312b4402ab3f2fa6)
Risks
Newbuild ship deliveries could be delayed for any number of reasons. This is a chart from STNG's deck...they obviously want people to think that market is wrong and that less deliveries will come in lmao so idk
https://preview.redd.it/4hgyjft5slde1.png?width=1245&format=png&auto=webp&s=51287a96fd0b007a9c1bbded5eb35f79b12e267e
Iran's crude exports drastically changed in December. As of now I can't see evidence of this forcing refinery closures anywhere. Refinery closures are bearish product tanker rates but the disruption may add ton-miles and more importantly create urgency from fuel buyers that temporarily forces rates higher.
https://preview.redd.it/e0p5pjsqslde1.png?width=1165&format=png&auto=webp&s=aa985f783d37c0ba13716d2a8a63280fc87ba38e
Bottom line anything can happen in shipping, if another trade route gets blockaded for whatever reason and forces ton-miles up it can create a lot more demand for tankers. Good luck !
Here are my positions
https://preview.redd.it/sokrtrq9ulde1.png?width=1975&format=png&auto=webp&s=988529a18220e57fd31a3fb2d94ece9262802d82
Good luck