Jon Najarian’s heat seeker has spotted unusual action in this energy name. What does the OptionMonster make of it?
Peabody Energy, a coal company, landed on the radar due to excessive call buying. “It averages 8,000 calls but it traded 50,000 yesterday and today it remains very active,” Najarian says.
The heaviest activity is at the April 34 strike, he adds. Despite gains of 5% in less than a week, the action suggests institutional investors are betting that the stock has more upside.
Although the catalyst is unknown, Najarian tells us market chatter suggests a very large investor may take a substantial stake in the company or might even make a bid for the entire company.
Trader Steve Grasso confirms that he too has heard the chatter. However, he thinks the trade is longAlpha Natural Resources. “The whole space is pretty much on its butt,” he says, “and people are bottom fishing,” he adds.
That is, pros are buying underperformers in anticipation of M&A activity. “Other names could be goosed dramatically by this,” he says.