Calls Hot as Peabody Energy Corporation (BTU) Gets a Lift from GOP

Peabody Energy Corporation calls are crossing the tape at four times the intraday average

by Karee Venema

Published on Nov 5, 2014 at 10:40 AM
Updated on Apr 20, 2015 at 5:32 PM

Peabody Energy Corporation (NYSE:BTU) is seeing a rare move higher today, as the coal sector gets a lift from yesterday's Republican win in the midterm elections. The positive price action has sparked a rush of call activity in the equity's options pits, with volume crossing the tape at a rate four times the intraday average. Amid this accelerated activity, the stock's 30-day at-the-money implied volatility (IV) has edged 2.9% higher to 50.5% -- in the 97th percentile of its annual range.

Most active by a mile is BTU's January 2015 10-strike call, where 5,799 contracts have traded. (As a point of comparison, the next most active strike has fewer than 650 contracts on the tape.) A healthy portion of these calls have gone off at the ask price, IV is up 3.3 percentage points, and volume outstrips open interest -- all signs of buy-to-open activity. Delta on the call is docked at 0.63, suggesting a nearly 2-in-3 chance the stock will be perched in double-digit territory at the close on Friday, Jan. 16, when the series expires.

As noted, today's uptick runs counter to BTU's longer-term technical trajectory. In fact, the shares have surrendered 46% of their value this year to churn near $10.47. More recently, Peabody Energy Corporation (NYSE:BTU) has lagged the broader S&P 500 Index (SPX) by about 37 percentage points over the past three months.


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