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Put Selling Spikes on Arch Coal

Neutral-to-bullish options players have targeted ACI recently

by 3/27/2012 3:15:27 PM
Stocks quoted in this article:

Arch Coal, Inc. (ACI - 11.38) has been targeted by neutral-to-bullish options traders recently, as more than 11,600 puts have been sold to open over the past two weeks. In fact, during the past 10 days, speculators on the major options exchanges have sold to open 4.3 times more puts than they have purchased.

Taking a closer look at the action, we see that near-term put sellers appear to be focusing on the May 11 strike. Open interest consists of 4,322 contracts at this strike, and it looks like the majority of these puts were sold to open. The $11 level hasn't been breached in intraday action since Nov. 21, 2008.

Weekly

Now could be an opportune time to buy options on ACI, rather than sell them, as the equity's Schaeffer's Volatility Scorecard (SVS) weighs in at 75 -- implying that options are currently inexpensive relative to the probability of a dramatic move in the shares.

Finally, the Schaeffer's Volatility Index (SVI) for ACI stands at 43%, which registers in the 21st percentile of its annual range -- implying that short-term options premiums are relatively low at the moment, and premium sellers may not be getting the biggest possible payoff for their positions.


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