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Consol Energy seen on firm ground

Consol Energy has bounced, and one investor thinks that there's no going back.

optionMONSTER's Depth Charge monitoring program detected the sale of about 2,600 December 40 puts for $0.99 and the purchase of a matching number of December 37 puts for about $0.45. Volume was more than 5 times open interest in both strikes.

The trade resulted in a credit of about $0.54, which the investor will get to keep if the coal miner remains above $40 through expiration. Below that level they'd be forced to buy shares, but they have the lower-strike contracts as protection in case it breaks down.

CNX rose 1.20 percent to $41.40 in late morning trading and is up 17 percent in the last week amid a surge of bullishness toward the industry group.

Known as a put credit spread , today's option strategy is an example of a market-neutral transaction that makes money from the passage of time rather than a directional move. But it can also be an effective way for an investor to manage an entry into the stock if it pushes lower. (See Chris McKhann's column earlier in the week for more.)

More than 8,600 contracts have traded in CNX today, which is about triple the daily average.

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.


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

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