The Market Vectors Coal ETF has been driven from the 52-week highs, and yesterday traders were playing for a bounce.
The options paper focused on the October 23 calls and the October 26 calls. The 23s were bought for $1.05 and the 26s were sold for $0.20. There was barely any previous positioning in either strike before the trade appeared.
Owning calls locks in the price investors must pay to buy the shares, and selling calls fixes their maximum exit. They paid $0.85, and could potentially collect the $3 difference between the two strike prices. That's profit of 253 percent if KOL pushes back to $26.
The fund closed at $22.40 yesterday, down 2.18 percent. It's declined from over $42 a year ago, and has really been beaten down in a big way. KOL owns stakes in the well-known producers like Consol Energy, Peabody Energy and equipment maker Joy Global.
Almost 3,300 contracts traded in the fund, versus fewer than 200 in a normal session. Calls outnumbered puts by more than 200 to 1, so the sentiment was clearly bullish!
DISCLOSURE: I HAVE NO POSITION IN KOL
(A version of this post appeared on InsideOptions Pro yesterday.)
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