Options Trading News

August 3, 2012  Fri 12:07 PM CT

A huge put spread dominates today's unusual option trade in Consol Energy as it hovers near the lows.

CNX trades at $29.47, up 5.89 percent on the day. The coal and natural-gas producer has been fighting to break higher, as they were at three-year lows of $26.41 a month ago. Shares have been trending lower for the last year, having traded above $50 a year ago.

More than 196,000 CNX options trade, compared to a daily average of 8,000. A trader bought 81,597 January 29 puts for the ask price of $3.55 against open interest of 249. Seconds later, he or she sold 81,597 of the October 29 puts for $2.30. The open interest at that strike was more than 85,000, so this could have been an opening or closing transaction.

If it was an opening transaction, this is a calendar spread that is designed to profit from shares remaining around $29 through that October expiration. But given the volumes and the usually light action in CNX, it seems more likely that the trader is rolling the long put position to allow more time for the position to work or more time for the hedge to protect. (See our Education section)
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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