Peabody Coal Hedged Bond Trade Closed for +32.5% Profit
In my previous blog about the Peabody Partially Hedged Bond trade here I wrote:
Now it is still only a paper profit at this point and there are still things that can go wrong in the outcome of the reorganization of the Company and the dispute between our class of bonds and holders of other more senior bonds - but the situation looks much better than it did.
Today that profit was realized. I sold the bonds for 38 cents on the $1.00 and the trade was closed for an overall +32.5% cash profit.
Why did I sell? After almost depression like conditions for the past few years the price of coal has more than doubled this year providing the euphoria for coal related securities. I don't know if this rally is sustainable.........but more importantly the complications of the reorganization of Peabody and who will ultimately end up with what are beyond my ability to comfortably analyze and I see opportunities in other commodity related securities that I do understand in much greater depth for 5-10X multiples of return. Therefore it became obvious that the best course of action for me was to sell and reinvest elsewhere.