Alpha Natural Resources (ANR, news, chart, volatility) saw bullish trading amid a recovery in the coal stocks Tuesday. The Market Vectors Coal Fund (KOL), which was down 40 percent month-to-date prior to today, gained $2.25 to $29.44. ANR was one of the stars of the show, rallying $8.02, or 18.5 percent, to $51.43. In the options market,13,000 ANR calls and only 634 puts traded on the day. The volume included a block of 5,000 January 65 calls traded offerside for $5.50 and 5,000 of the January 85 calls traded bidside for $1.10. With open interest of 273 in the 65s and 781 in the 85s, the volume appears to be the opening of a substantial bull call spread. If so, the strategist bought the 65s, sold the 85s, and paid a net debit of $4.40 per spread. The potential payoff is $15.60 if ANR rallies above $85.00, or 64.6 percent, by January options expiration (108 days).
About the Author (Author Profile)
Frederic Ruffy is a well-known trader, writer, and strategist who has spent years educating investors and creating intelligent, insightful, unbiased market observations that are frequently cited by the Wall Street Journal and other financial publications. As senior analyst, Fred provides frequent and regular notes and daily updates for activity of interest.