Put Writing: Make Money With Coal 'Insurance' (Video)

Oct. 7.12 | About: Arch Coal (ARCH)

Writing put options can be like selling insurance. Mitt Romney is giving us reason to believe coal stocks like Arch Coal (ACI), Peabody Energy (BTU), Alpha Natural Resources (ANR), Cloud Peak Energy (NYSE:CLD), and James River Coal Company (JRCC) will not sell off in the near term. That is an opportunity to earn an insurance premium.

Like an insurance company, we are on the hook if disaster strikes, so selling puts carries the same risks of owning common stock. But if disaster does not strike, the insurance goes unused and the insurance company earns their profit.

Disclosure: I am long ACI. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.