Sinking Peabody Energy Corporation (BTU) Sees a Barrage of Put Buying

Peabody Energy Corporation (BTU) puts are trading at 10 times the average intraday pace

by Karee Venema

Published on Mar 4, 2015 at 3:03 PM
Updated on Jun 24, 2020 at 10:16 AM

It's a bad day for energy names, and Peabody Energy Corporation (NYSE:BTU) is no exception. The stock is off 7.1% -- deepening its year-over-year deficit to 61% -- to trade at $6.72. Options traders are responding in kind, and are scooping puts at 10 times what's typically seen at this point in the day.

Put players, specifically, have set their sights on BTU's weekly 3/13 and June series of options. In the former, buy-to-open activity has been detected at the 6.50 and 7 strikes, while it appears new positions are being purchased at the 4 and 5 strikes in the latter. By initiating the puts, speculators expect BTU to settle south of the strike prices at the respective expiration dates.

Today's pop in put volume just echoes the withstanding trend witnessed in the stock's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, the equity's 10-day put/call volume ratio of 1.03 rests higher than 79% of similar readings taken in the past year.

Echoing this put-skewed bias is BTU's Schaeffer's put/call open interest ratio (SOIR) of 1.03, which ranks in the 92nd annual percentile. In other words, short-term speculators have been more put-heavy toward the security just 8% of the time within the past year.

Outside of the options pits, however, there is still plenty of room on Peabody Energy Corporation's (NYSE:BTU) bearish bandwagon. Among covering analysts, 44% maintain a "buy" or better rating, while the average 12-month price target of $9.85 stands at a 46.6% premium to current trading levels. Going forward, another round of downwardly revised analyst notes could create additional headwinds for the shares.


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