Coal supplier Alpha Natural Resources, Inc. (NYSE: ANR), a name where options action has had major predictive power in the past, is seeing call activity soar today with more than 5,800 August $35 calls and 2,250 August $40 calls trading. Additional action in the September $32.50 and $35 calls as well with shares trading at $33.50. 60% of the $35 calls have traded offer side and almost all of the August $40 and September $32.50 action. Shares are nearly 10% higher today and breaking through major resistance. Alpha is trying to takeover Foundation Coal (FCL), but a top shareholder opposes the deal. Implied volatility remains near 6 month lows at 70%. Valuation is the cheapest among the coal stocks and the company will report earnings on July 27th. This type of far OTM near month call buying implies the possibility that ANR could once again become an acquisition target, especially if the Foundation deal falls through.
Joe Kunkle, OPTIONSHAWK.COM