Wanted: Peabody Energy Corporation (BTU) Weekly Options

Call volume is accelerated, as Peabody Energy Corporation (BTU) bounces from 12-year lows

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Published on Feb 4, 2015 at 1:35 PM
Updated on Apr 20, 2015 at 5:32 PM

Yesterday, Peabody Energy Corporation (NYSE:BTU) gapped higher, after sector peer Arch Coal Inc (NYSE:ACI) posted a positive earnings report. Today, BTU is keeping this momentum alive -- as speculation over a potential strategic partnership overshadows the Department of Energy suspended funding of the FutureGen clean-coal project -- adding 2.7% to trade at $7.26. As such, calls are crossing the tape at levels five times what's normally seen at this point in the day.

Most active is BTU's weekly 2/13 7.50-strike call, followed by the weekly 2/6 7- and 7.50-strike calls. According to Trade-alert.com, new long positions are being opened here, meaning traders expect the stock to settle north of the strikes by the respective expiration dates.

Typically, traders have taken a bearish approach to BTU. For instance, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 3.09 sits only 2 percentage points from an annual extreme, pointing to a much stronger-than-usual preference for puts over calls.

Outside the options pits, BTU is a favorite of short sellers. Roughly 20% of the stock's float is sold short, accounting for nearly a week's worth of pent-up buying demand, at average daily levels.

This pessimism seems to be well-deserved, as Peabody Energy Corporation (NYSE:BTU) has shed almost 55% on a year-over-year basis and hit a 12-year low just one week ago. The security's current rally attempt could be short-lived, as it's seeing overhead pressure from its descending 10-week moving average, which has acted as resistance in the past.

Weekly Chart of BTU Since February 2014 with 10-Week Moving Average

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