Traders Play Defense on Kinross Gold, H-P

News today that Canada's third-largest gold producer, Kinross Gold (KGC - commentary - Cramer's Take), would pay $250 million for control of a gold project in Chile sparked a wave of outsized interest in its options. Kinross shares are up about 1% at $11.33, and large-size spread activity has sent total volume to 4 times the normal level. The trade flow here is interesting not just for the size, but for the timing -- virtually all of today's active volume is situated in the January contract, well in advance of the company's next earnings report.

The trade flow here appears highly defensive, with a 15,000-lot credit spread between the January $12.50 and $17.50 strikes generating $1.10 a contract for the trader under the proviso that both contracts must expire worthless by mid-January. More concentration of volume appears at the January $10 put strike, which may have been bought in concert with the sale of a $17.50 call -- a position that would protect a Kinross shareholder from erosion in his or her holding below the $10 level, but call away the long stock position with a recovery past $17.50. The price of this long collar at $1.10 could provide some valuable peace of mind for a trader who may have acquired Kinross shares at some point on their 47% descent over the past 52 weeks. Again, according to the charts at Interactive Brokers, today's active volume in Kinross is heavier than at any point in the past 52 weeks.

Hewlett-Packard's (HPQ - commentary - Cramer's Take) decision to preannounce stronger-than-projected fourth-quarter earnings provided midweek support for the stock, as the company was able to persuade investors (at least temporarily) that effective cost controls were helping the company weather a difficult market environment. Interactive Brokers is reporting implied volatility on Hewlett-Packard options at 84%, which although lower than the 87% historic reading on the stock is still up 17% in the past two days.

HPQ shares up 2% to $33.77, and with put-side premiums cheap relative to calls on back of the share price movement, we've noticed an unusually brash level of buying interest in January $32.50 puts. Virtually all of the 18,000-plus contracts to sell Hewlett-Packard shares at $32.50 were bought on the offer, and the conviction of this sentiment is clear given that open interest at this strike numbered fewer than 3,000 contracts as of this morning. With a price tag of some $4.20 for this position, the contract requires a decline of 15% below current levels before the trader begins to make money.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.