Premiums are starting to drop in Arch Coal, and traders are
getting out while the getting is good.
optionMONSTER's tracking systems detected the sale of more than
4,000 November 16 calls, most of which priced for $1.47 to $1.55.
Volume was more than 4 times open interest in the strike.
ACI rose 1.28 percent to $16.58 on Friday. The coal producer's
shares have lost about half their value since April amid concerns
about the global economy and lost production at its mine in Mount
Laurel, West Virginia.
The call selling reflects a belief that gains in the stock will be
limited in the next four weeks. But it also comes as
pushes down to 66 percent from about 95 percent earlier in the
month, which means that options are losing value as traders price
in smaller moves.
If an investor owns the shares and wants to earn income
on an existing long position
, it makes sense to sell calls now before premiums drop further.
The timing is also good because
will accelerate into expiration.
The November 16 puts were sold for about $1.08, which reflects a
similar desire to earn premium from the passage of time. (See our
ACI's earnings come out the morning of Oct. 28. Volatility and
option premiums also tend to fall after the release of financial
results, so that could also support Friday's trades.
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