See my earlier post about CONSOL Energy (CNX) and coal stocks in general (link: CNX Trade). Using the same fundamental approach, a similar bull put spread can done for PCX:
- Buy to open April $17 puts
- Sell to open April $18 puts
Does it meet the 5-10-20 test?
5% - Check
10% - The cushion between $18 and current stock price of $20.23 is 11% - Check
20% - The above bull put spread is marked $0.32 as of Friday's close. However, the bid/ask spreads are wide in this name. Assuming the order can be filled for $0.25 credit, the trade provides 33% max profit before commissions - Check
From a technical standpoint, similar to MEE, PCX has near perfect rising support line intact since Sept'09 and the stock looks poised to take out 52-week high. However, GS target here is only $22, so that may limit further run-up from here. Similar to MEE bull put spread, PCX bull put spread is not ideally below the support line, but it does meet the 5-10-20 test and given the bullish fundamentals, I like the odds.
For more on my 5-10-20 rule, click here: 5-10-20 Rule
Good luck!
- Buy to open April $17 puts
