Put Volume Pops on Plunging Arch Coal Inc (ACI)

Arch Coal Inc (NYSE:ACI) has followed its sector peers deep into the red today

by Karee Venema

Published on Sep 1, 2015 at 3:09 PM
Updated on Jun 24, 2020 at 10:16 AM

Coal stocks are getting hammered today, and Arch Coal Inc (NYSE:ACI) is no exception. The stock is down 25.9% at $6.90 -- and comfortably on the short-sale restricted list. Against this backdrop, option volume is running at seven times what's typically seen at this point in the day, with puts outpacing calls by a nearly 2-to-1 margin.

Receiving notable attention is ACI's October 5 put, where all signs suggest new positions are being purchased for a volume-weighted average price (VWAP) of $1.52. Based on this average entry price, breakeven for the put buyers is $3.48 (strike less VWAP).

Widening the sentiment scope reveals today's accelerated put activity is just more of the same. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ACI's 10-day put/call volume ratio has surged to 4.03 from 1.84 in the past two weeks. What's more, the current ratio ranks in the 94th annual percentile, meaning puts have been bought to open over calls at a near-annual-high clip.

Echoing this is the security's Schaeffer's put/call open interest ratio (SOIR) of 1.52. Not only does this show that put open interest outstrips call open interest among options expiring in three months or less, but it rests just 2 percentage points from a 52-week peak. Simply stated, speculative traders have rarely been as put-heavy as they are now.

Technically speaking, the stock -- along with a number of other names -- managed to avoid August's broad-market slump. Specifically, heading into today's trading, shares of ACI were up 831% from their early August record low of $1. Amid this bounce, though, the security's 14-day Relative Strength Index (RSI) rose to 87 -- in overbought territory -- which may partially explain today's pullback. Nevertheless, Arch Coal Inc remains a long-term laggard, down 61% year-to-date.

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