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.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV