Schaeffer's Trading Floor Blog

Put Buying Picks Up On Peabody Energy Corporation (BTU)

Option bears and short sellers have BTU in their crosshairs

by 3/24/2014 3:37 PM
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Put buyers have been getting acquainted with Peabody Energy Corporation (NYSE:BTU) recently. On the Chicago Board Options Exchange (CBOE) in particular, the coal name has racked up a five-day put/call volume ratio of 3.75, as nearly four puts have been bought to open for each call in the last week.

After taking a step back to include 10 sessions' worth of data from the International Securities Exchange (ISE), CBOE, and NASDAQ OMX PHLX (PHLX), BTU's put/call volume ratio drops to 0.41. Although call-skewed on an absolute basis, relative to the last 12 months' worth of information, the current reading actually ranks higher than two-thirds of comparable figures. In other words, from a historical perspective, traders have scooped up long BTU puts over calls at a faster-than-usual rate.

If that's not enough, many of the options players using calls to bet on the shares are skeptical, as well. Specifically, in the last two weeks, Peabody Energy calls sold to open have outnumbered those bought to open by a nearly 1.4-to-1 margin. While these speculators aren't necessarily anticipating that the stock will fall, by writing calls to open, neither are they expecting it to rise.

Elsewhere, short sellers have taken a shine to BTU. Currently, about 7% of the equity's available float is sold short, which represents nearly three sessions' worth of buying activity, at average daily volumes.

All of the aforementioned skepticism is understandable when viewed in light of the shares' technical struggles. Although Peabody Energy Corporation (NYSE:BTU) is up nearly 2% this afternoon to trade at $16.05, the stock has shed nearly 18% on a year-to-date basis, and underperformed the broader S&P 500 Index (SPX) by close to 17 percentage points in the last three months. What's more, the shares continue to be pressured lower by their descending 10-week moving average.

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