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Dykstra: Burnt Peabody

The coal firm shed $6 in six days, and calls look nice.

This statement defines my approach to the stock market, and I read it every morning before I begin the trading day: Be fearful when others are greedy and greedy when others are fearful.

Those who have been following my deep-in-the-money calls have come to learn that the recent stock market volatility creates tremendous buying opportunities. Because we buy deep-in-the-money, the delta approaches 100%, which means for every point change in the underlying asset's price, there will be an equal and simultaneous change in the price of the option in the same direction.

So investing in the option is similar to investing in the underlying asset, except the deep-in-the-money call holder will have the benefits of a lower capital outlay, leverage and greater profit potential. This is also the reason we choose our expiration date four to six months out.

Wall Street is coming off the worst week in four years, with the past five trading days wiping out all of this year's gains. So without further ado, let's take advantage of a stock on sale.

Peabody Energy

(BTU) - Get Peabody Energy Corporation Report

, the world's largest coal company, has been hammered in the recent selloff. Going back six business days, Peabody traded as high as $44.44. On Friday, Peabody closed at $38.94, so almost $6 disappeared for no real reason.

Bottom line: This is one of the best deep-in-the-money calls on the board.

Coal will continue to be a major component of the world's energy supply, as it fuels about 10% of U.S. electricity and 3% of worldwide electricity. The company is the clear leader in its industry, with really only one competitor,

Arch Coal

(ACI) - Get Albertsons Cos. Inc. Report


Consol Energy

(CNX) - Get CNX Resources Corporation Report

is more of a multifuel energy company.

Peabody clearly stands alone at the top of its class, which is why we are going to buy 10 Sept. 30 deep-in-the-money calls (BTUIF). With the market continuing to head south Monday morning, we will place our good-till-canceled, or GTC, limit order in at $9.90. Be patient with this order, as the market is correcting; let it come in. If we get filled at $9.90, we will control 1,000 shares of BTU until the third Friday in September.

Let me remind you: Buying deep-in-the-money calls works well when we experience a volatile market. In fact, I like volatile markets!

Please take note: Starting this week, I will give you a weekly update on the performance of my picks so far. I believe in accountability, so each week you will be updated on the deep-in-the-money calls I have picked this year.

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For those of you new to the game, don't panic. The expiration dates on our open positions remain months away, so trust me. This is not my first rodeo. We play nine innings for a reason.

Now for Sports

Given the attention I paid to the New York Yankees last week in my column, I feel obligated to mention their arch-rivals, the Boston Red Sox, this week.

Not surprisingly, there is plenty to speculate about in Beantown. Curt Schilling, my former Phillies teammate, who carved his way into the exclusive club of Boston heroes with his "Bloody Sock" performance in the 2004 ALCS and World Series, wants an extension of his contract. The Red Sox would prefer to see how his 40 year-old body, which has never been ripped, holds up this season. In response, Schilling has declared that he will test the free-agent waters after the season.

Despite his well-earned ace status, Schill will be sharing the spotlight with rookie hurler Daisuke Matsuzaka, the Japanese sensation who already carries the moniker Dice-K. Recall that the Red Sox paid $51 million just for the opportunity to negotiate a contract with Matsuzaka. That, in and of itself, creates fascination in the American media.

On the other hand, the Japanese media are obsessed with Matsuzaka to such a degree that he has achieved a status usually reserved for international rock stars. Just warming up is treated as a monumental event.

Matsuzaka is scheduled to pitch against the Marlins tomorrow in Jupiter, Fla. Accommodating the media may prove to be a daunting task, in that the press box at the stadium has 24 seats. The Red Sox have 93 reporters scheduled to attend the game, 12 from Boston and an astounding 81 from Japan.

Amazingly, the frenzy surrounding Matsuzaka has relegated the magnificent Ichiro, a bona-fide superstar, to mere afterthought status. Regardless of how they slice it, the Red Sox have rolled the "Dice," banking on Matsuzaka to get a lot of K's in the scorebook and generate a lot of $K at the box office.

Pitching Cubs

Other noteworthy news from baseball involves Ryan Howard's compensation for this year and a bold prediction from the ace of the Cubs pitching staff. Howard, who has had a monstrous impact in his one year and 145 days in the majors, was given a $900,000 contract to play this year for the Phillies. That figure matches the record for compensation for a two-year player, previously held by the great Albert Pujols. Nonetheless, Howard, who essentially has no leverage, was a bit chagrined with the number.

If Ryan continues to put up his studly numbers, I am supremely confident that he will be rewarded with a lucrative contract commensurate with his contributions.

While Howard has set the bar extremely high with his performance, Cubs ace Carlos Zambrano has set the bar as high as it goes with his mouth. Zambrano, an excellent pitcher, boldly guaranteed that the Cubs would win the World Series this year, and predicted that he would win the NL Cy Young Award.

Granted, the Cubs acquired Alfonso Soriano in the off-season and will have Lou Piniella steering the ship. Despite the obvious upgrades in a team that had the worst record in the NL last season, Zambrano's assertions will surely elevate Lou's blood pressure a bit.

Sweet Dreams

As I stated in a previous column, spring training is a time when dreams abound. Over the weekend, I had an opportunity to revisit the place where my dreams were germinated and cultivated: the Little League baseball field.

I addressed the Little Leaguers, as well as their parents, regarding dreams and the realization of such. I must admit, it was difficult for me, because I wanted to make sure I did not alienate anybody with my remarks. After all, reality dictates that a small proportion of Little Leaguers will play in high school, a handful will play in college, and maybe one or two will make a professional club. Moreover, a significant percentage will lose interest and cease playing as they pursue other passions.

Nevertheless, I cannot help but notice the expectations in the eyes of the parents, sometimes unrealistic, regarding their precious kids. The Players Club appreciates and understands those expectations. As a result, we are dedicated to providing athletes with recurring cash flow such that they can dream the dreams of their kids, unencumbered by financial worries. Hopefully, that will enable us to have the time and resources to make our kids' dreams come true.

Always remember: Life is a journey; enjoy the ride!

At the time of publication, Dykstra was long Peabody.

Nicknamed "Nails" for his tough style of play during his Major League Baseball career, Lenny Dykstra was an integral member of the powerful Mets of the mid-1980s, including the world champion 1986 squad, and the Phillies in the early 1990s.

Today, Dykstra manages his own stock portfolio and serves as president of several of his privately held companies, including car washes; a partnership with Castrol in "Team Dykstra" Quick Lube Centers; a state-of-the-art ConocoPhillips fueling facility; a real estate development company; and a new venture to develop several "I Sold It on eBay" stores throughout high-demographic areas of Southern California.