Consol Energy (NYSE:CNX) engages in the production of multifuel energy and provision of energy services primarily to electric power generation industry in the United States. The company has two units, Coal and Gas. The company's Coal unit engages in the mining, preparation, and marketing of steam coal, sold primarily to power generators; and metallurgical coal, sold to metal and coke producers. Consol's Gas unit produces coalbed methane gas for sale primarily to gas wholesalers from its coal properties in Pennsylvania, Virginia, and West Virginia. In addition, Consol provides energy services, including terminal services, industrial supply services, and coal waste disposal services.
Energy-related stocks have been among the best performers in recent months and this week-end, CNX emerged near the top of a "technicals only" scan for bullish issues in this segment. Friday's move to an all-time high suggests robust buying pressure and the top of the previous trading range (near $48) should provide a margin of support for any future consolidation. Readers who favor the outlook for the company's share value in the near-term should consider this position.
Fundamentals Chart Earnings Dates Analyst Ratings
PLAY (conservative - bullish/credit spread):
BUY PUT JUL-40.00 CNX-SH OI=14532 ASK=$0.25
SELL PUT JUL-45.00 CNX-SI OI=5058 BID=$0.70
INITIAL "NET-CREDIT" TARGET = $0.50-$0.55
POTENTIAL PROFIT (X 5 contracts @ $0.50) = $250
MARGIN REQUIREMENT (X 5 contracts) = $2250
RETURN ON INVESTMENT (max) = 11.1%
COST BASIS = $44.50
INITIAL EXIT STRATEGY:
Once the position is open, traders should place a (contingent) order to close the short ($45.00) put options if the stock price moves below $46.75 on an intraday basis. A "net-debit" order of $1.10-$1.15 to exit the entire spread may also be appropriate for some portfolios. Future adjustments to this loss-limit/exit point will be posted in the MCM Newsletter.