A large call sale sees little upside in Arch Coal.
optionMONSTER systems show that a block of 20,000 August 3 calls was sold for the bid price of $0.15 today. The volume was more than 10 times the previous open interest at that time, clearly indicating that this is a new position.
The calls could have been sold naked, but it is far more likely that they were traded against an existing long ACI position in what could be a covered-call strategy . In the latter case, the trader sees essentially no upside in the stock but may just be selling volatility to collect the premium. (See our Education section)
The implied volatility of those calls is 55 percent, while the 10-day historical volatility of ACI is down at 30 percent.
The coal miner is down again today, falling 3 percent to a new 52-week low of $2.91 in midday trading. Shares have been trending lower since trading above $5 in April.
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