Today a fellow trader suggested a fundamental reason for getting bullish on BTU after the next pull back. Since there’s an expectation for a pull back then we need to take a look at this.
BTU has been in a down channel since February. Something may change eventually, but until it breaks out of the channel it’s still in a long term down trend. Two days ago it touched the trend line with a long legged doji pattern. The next day it closed below the doji and the previous day’s open. A reversal may be starting.
The MACD has started to roll over, Stochastic, and RSI are also pointing down. PPS is also giving a sell signal. There are only 11 days left in July so that may be taking on too much Gamma. The Implied Volatility is 61% in August which is close enough to July. Today we decided to go with a short call vertical with the short strike around 30 delta. The Aug 26/27 spread looks the most interesting. We managed to get a fill at .32 per spread just below the highs of the day. Today the spread closed up 6% from BTU dropping over 1.00.