The largest blocks of options in the gold mining sector yesterday were part of a spread in Kinross Gold Corporation (KGC), as an investor sold the January 5-6 call spreads on KGC at $0.21 17,300x. Today's open interest numbers indicate that a position was being rolled down in strikes. The stock is down more than 30% in the past few weeks, to $4.56, and the investor was closing out a positoin in the January 6's while selling-to-open a new position in the January 5's. It might be an adjustment to a covered call or buy-write on KGC, and seems to be expressing the view that the stock will see limited upside through the rest of this year. Newmont Mining Corporation (NEM) was down nearly 6% to $27.22 yesterday, and January 19 puts on the stock were being opened. Goldcorp, Inc. (GG), which fell 4.6% to $22.35, saw increasing interest in its January 15 puts. Gold Fields Limited (GFI) dropped 7.5% to $4.70. One payer was selling the October 6-8 call spread 8,000x for $0.07 a contract, and closing a short October 8 call for $0.06 while opening the October 6 calls. Lastly, Barrick Gold Corporation (ABX), the world's largest miner, dropped 8.3% to $14.78 and opening activity was seen in October 13 puts on the stock. Implied volatility in ABX is now 58% - the upper end (98th percentile) of the 52-week range.
Suffice to say, there's been a lot of carnage in the gold mining space and all of the names mentioned here are falling to multi-year lows. The options order flow remains bearish and, yesterday for example, call sellers and put buyers seemed to dominate the activity. Implied volatiity is very elevated. Maybe there is too much pessimism, but at the same time, nobody wants to "catch the falling knife". Still, if you believe the sell-off is overdone, now might be an opportunity to sift through the sector and pick up some stocks that have strong fundamentals - while taking advantage of the high implied volatiilty to write calls. In other words, covered calls or buy-write strategies (buy stock, sell calls) might be viable ideas for the battered gold mining names today.
OptionsProfits can be followed on Twitter at twitter.com/OptionsProfits.
EXCLUSIVE OFFER: Jim Cramer's Protégé, Dave Peltier, only buys Stocks Under $10 that he thinks could potentially double. See what he's trading today with a 14-day FREE pass.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas