This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Coal Rally Draws Buyers to Peabody

By David Russell, reporter at OptionMonster

NEW YORK -- Coal miners dominated Wednesday's market gains, and bulls clambered for exposure to Peabody Energy (BTU).

OptionMonster's market scanners detected huge volume in the St. Louis-based company, with more than 36,000 contracts changing hands. That was almost quadruple its daily average.

The first big trade that caught our attention entailed the purchase of 2,500 January 25 calls for $1.32 and the sale of an equal number of January 19 puts for $1.92. Owning calls locks in the price where shares can be sold, while selling puts can make money if the stock climbs or holds its ground.

Combining the two strategies is strongly bullish, letting the investor collect a credit of 64 cents and carrying the potential of infinite profits if the stock rallies. But he or she also faces losses to the downside.

Peabody shares rose 2.1% to $20.90 Wednesday. The stock is up 10% in the last two weeks as improving sentiment toward global growth lifts economically sensitive material stocks.

Later in the session, an even larger Peabody trade occurred in the form of a call spread. More than 9,000 June 21 calls were bought, mostly for $1.05, while a similar number of June 23 calls were sold for 35 cents. The trader stands to receive $2 if the stock closes at or above $23 on expiration, a profit of 186%.

Calls accounted for more than 80% of Wednesday's total volume in the name, a reflection of the bullish sentiment.

Russell has no positions in BTU.
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $112.12 0.00%
FB $93.24 0.00%
GOOG $643.61 0.00%
YHOO $32.52 0.00%
TSLA $220.69 0.00%


Chart of I:DJI
DOW 17,084.49 +33.74 0.20%
S&P 500 2,014.89 +15.91 0.80%
NASDAQ 4,830.47 +19.6820 0.41%

Free Reports