Little upside seen for Walter Energy


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Try as it might, Walter Energy can't seem to get any respect from the bulls.

optionMONSTER's tracking systems detected sale of 5,000 September 32.50 calls for $0.93 and the purchase of an equal number of September 37.50 calls for $0.24. Volume surpassed open interest at both strikes, indicating that new positions were initiated.

The investor collected a credit of $0.69, which he or she will get to keep as profit if the ailing coal miner closes at or below $32.50 on expiration. They'll lose a maximum of $4.31 if it rallies to $37.50 or higher. (See our Education section for other market-neutral strategies, which make money from the passage of time rather than a directional move.)

WLT rose 0.91 percent to $31.01 yesterday but has lost almost half its value since the start of 2012. Coal companies have been especially weak as the Chinese economy remains in a funk and cheap natural gas steals market share among U.S. utilities.

Yesterday's credit spread also stands to benefit from the accelerating pace of time decay that will occur in the September options over the next 2-1/2 weeks.

Overall option volume was more than twice average amounts in the session.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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