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October 11, 2012  Thu 3:16 AM CT

CNX: SEE CHART GET CHAIN FIND STRATEGIES
Slowly but surely, buyers are returning to coal miner Consol Energy.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 2,500 November 33 calls for $1.91 and the sale of 3,750 November 36 calls for $0.76. Volume was more than quadruple open interest at both strikes.

This call vertical spread will earn a maximum profit of 290 percent if CNX closes at $36 on expiration. Gains will erode above that level.

That varying performance is caused by the greater number of calls sold at the higher strike. This generates additional income to lower the cost of the position but creates risk if the shares rally too much. The strategy is also known as a ratio spread because the number of contracts sold exceeded those bought by a 3-to-2 ratio.

CNX fell 0.79 percent to $32.85 yesterday but has been grinding higher since the summer. Coal stocks significantly underperformed the market in the first half of 2012 as investors priced in weak global growth.

The investor's choice of a ratio spread, which is designed to maximize gains from a gradual move, shows that investors don't expect a runaway rally in the name. A similar strategy appeared in the January contracts last week.

Overall option volume in CNX was below average yesterday, but calls outnumbered puts by more than 5 to 1.
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