James River Coal is in the midst of an rally, and one investor
wants to give it free rein to run.
optionMONSTER's Heat Seeker tracking system detected the purchase
of about 3,000 March 17.50 calls for about $6.80 and the sale of a
matching number of June 30 calls for $1.05. Volume was below open
interest in the March contracts, suggesting a short position was
rolled from one strike to the other.
The transaction was likely done by an investor who owns the shares
and has been selling calls to earn income. The strategy let them
reduce their entry price, but limits their profits if the stock
rallies. Yesterday's transaction let them adjust the position to
get more upside exposure.
He or she essentially paid about $5.75, and in return will have the
right to earn an additional $12.50 on the shares moving higher.
They also obtained three more months for JRCC to hit its mark.
The stock fell 1.61 percent to $23.24 yesterday. It began the
session with a 33 percent gain in the preceding month as investors
hunt for potential takeover targets in the coal-mining sector. Pete
wrote about a similar transaction on Monday.
Overall options volume in JRCC was 14 times greater than average,
with calls accounting for 91 percent of the activity.
(Chart courtesy of tradeMONSTER)
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