Price Forecast:

Bullish Case: With strong industrial demand and the ongoing lawsuit aimed at boosting coal's operational capacity, ARCH could see significant price appreciation. The implied volatility skew suggests potential upward movement, supported by bullish sentiment in recent trading volume.

Bearish Case: Regulatory pressures and declining coal prices could threaten ARCH's profitability, especially with persistent environmental policies. High implied volatility levels reflect market uncertainty, stirring cautious sentiment around short-term performance.

Potential Outcomes:

1. 55% chance of moderate price increase due to industrial demand.
2. 30% chance of price decline driven by regulatory pressures.
3. 15% chance of stagnation amid market volatility.

Trading Oracle: Advise entering a bullish debit spread, buying January 2025 175C while selling the 185C. This strategy capitalizes on high implied volatility, leveraging potential gains if ARCH prices rise towards $175 shortly. Consider underlying demand shifts, but be prepared to adjust for volatility spikes.

December 18, 2024