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Long-term bearish trade in Arch Coal

David Russell (david.russell@optionmonster.com)

A large trader apparently thinks that Arch Coal is going back to long-term lows.

optionMONSTER's Depth Charge tracking program detected the purchase of some 10,000 January 2015 3 puts for $0.87 and the sale of an equal number of January 2015 2.50 puts for $0.62. Volume was more than triple the previous open interest at each strike, indicating that new positions were initiated.

This bearish put spread cost $0.25 and will double the trader's money if the stock closes at or below $2.50 on expiration. (See our Education section for more on the strategy, which controls a move between two prices.)

ACI fell 0.76 percent to $3.92 yesterday. A $70 stock back in 2008, it has struggled along with other coal miners as amid weak economic growth in China and increased use of natural gas to generate electricity.

The stock hit an all-time low of $2.38 in April 2000, and yesterday's downside trade is looking for a potential return to that level.

Total option volume in the name was 7 times greater than average in the session, according to the Depth Charge. Overall puts outnumbered calls by a bearish 10-to-1 ratio.

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