James River Coal has been pummeled mercilessly along with other names in the sector, but one trader is betting that the stock will hold its current level for the next month.
More than 2,000 February 3 puts were sold for $0.30 in the final hour of Friday's session, according to optionMONSTER's tracking systems. The volume was well above the strike's open interest of 876 contracts at the beginning of the day, indicating that this is a new position.
JRCC surged 10.1 percent on Friday to close at $3.16, just above its 50-day moving average. The stock has lost more than half its value since trading above $7 last February but rallied along with other thermal-coal producers late last week as higher natural-gas prices raised prospects for cheaper heating alternatives this winter.
Friday's put seller is betting that JRCC will close above $3 by expiration on Feb. 15. If the stock is below that strike price, the trader will face the obligation to buy shares at an effective price of $2.70 once the credit from the put sale is included. (See our Education section)
Total option volume in the name exceeded 6,000 contracts on Friday, more than triple its daily average in the last month.
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