Coal concern Alpha Natural Resources, Inc. (NYSE: ANR) has spiked more than 20% today on the heels of its first-quarter earnings report. The company reported a 61% improvement in net income, which rose to $41 million, or 58 cents per share, compared to $25.5 million, or 39 cents per share, in the first quarter of 2008.
Revenue for the period inched higher to $424.4 million. ANR's profit easily exceeded Wall Street's expectations; analysts were looking for a profit of 48 cents per share on $515.5 million.
ANR gapped higher with the sound of the opening bell today, extending its year-to-date advance of 56.4%. If the stock keeps climbing, it could soon have a chance to challenge resistance from its 10-month moving average, which is currently hovering in the $33 neighborhood.
In light of today's sharp rise in the share price, heavy call volume on ANR ahead of earnings was definitely smart money. In the 10 days leading up to the report, option players on the International Securities Exchange (ISE) bought to open 11.33 times more calls than puts.
In the May series, peak call open interest of 4,519 contracts lies at the newly in-the-money 30 strike. More than 3,000 contracts crossed the tape here within the first 20 minutes of trading, with a block of 1,000 contracts changing hands at 9:44 a.m. at the bid price of $1.55. This indicates that the calls were sold, most likely to close, suggesting that some bullish bettors are already taking profits on their winning ANR bets.
Meanwhile, a short-squeeze rally could keep the stock afloat throughout the session. Short interest accounts for 4.6% of the equity's available float, representing 1.1 times ANR's average daily trading volume.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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