Disclaimer: All forms of trading and/or investment carry risks. Such activities may not be suitable for everyone.
Note, today’s option is a weekly option, where the returns are between 3-9% per month.
Let’s take a look at today’s recommendation.
Options Strategy – 06Dec13 Peabody Energy Corp (BTU) – a weekly options on this stock.
DIARY NOTE: There is no diary note on this.
Background : Peabody Energy Corporation (Peabody) is a private-sector coal company. The Company owns interests in 28 active coal mining operations located in the United States and Australia. The Company has a majority interest in 27 of those coal operations and a 50% equity interests in the Middlemount Mine in Australia. The Company also owns a non controlling interest in a mining operation in Venezuela. In addition to the Company’s mining operations, the Company markets and broker coals from its operations and other coal producers, both as principal and agent, and trade coal and freight-related contracts through trading and business offices. The Company conducts business through four principal segments: Western United States. Mining, Midwestern U.S. Mining, Australian Mining and Trading and Brokerage. The Company’s fifth segment, Corporate and Other, includes mining and export/transportation joint ventures, activities associated with certain energy-related commercial matters, Btu Conversion.
Current Outlook : This is very much dependent on the Prevailing market conditions.
In both the Short and Medium Term, it has a GREEN STATUS, where this particular stock has less volatility, or signs may exhibit stability on this stock.
Technical Analysis : BTU have crossed the 200EMA and a break of $19 would signify confirmation of a continued uptrend providing further upside potential. Trading volume has increased over consecutive trading days which indicates increasing institutional interest not just in this stock but across the sector as a whole.
Fundamental Analysis : Although longer term company fundamental criteria are NOT relevant for weekly options trades, please note there is no earnings nor ex-dividend date pre-expiry.
The Conditions for Entry : If this particular stock is able to trade above $19.00 in last hour (3-4pm) as preference, this is the entry sign for it. Do not enter if stock trading above $19.50. We are rleiant on a move up in the stock to gain maximum return.
Estimated ROI: Based on a Current Price of $18.97, the potential Premium is around $0.26.
A Call Option Strike Price at $19.50 for Dec13 Wk2, Yields 1.37%.
If this stock gets Exercised in 2nd week of Dec, the Return on the above info is about $0.79, giving a Yield of 4.16%.
In order to protect our downside risk, a Put Options with a Strike Price at $18.00 for Dec13, cost about $0.11.
Therefore, the Break Even point to buy this stock with the above options is around $18.82.
This gives us a Protection of around 94.89% on our downside risk.
Hence, with both Call and Put Options in place, if this stock gets Exercised in 2nd week of Dec13, the Return on the above info is about $0.68, giving a Yield of 3.58%.
Note, this is all conditional upon the criteria mentioned are met, and valid for the day itself only. This is the ROI of 3-9% per month I’ve mentioned in the previous post.
Let me know if you are interested to open an account and place a trade and you’ll get a reward by getting $100 in your account to start your trade.
Disclaimer: All forms of trading and/or investment carry risks. Such activities may not be suitable for everyone. This analysis is provided to you for general information only and does not constitute a recommendation, an offer or solicitation to purchase or sell the product mentioned.
It does not have any regard to your specific investment objectives, financial situation and any of your particular needs.
Accordingly, no warranty whatsoever is given and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of you acting based on this information.
Investments are subject to investment risks.