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Timely Call Buying in AUY

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Stocks in this article: AUY

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Yamana Gold (AUY) is a Toronto, Ontario miner. Its primary focus is on gold, but the company also explores for copper, molybdenum, zinc and silver. Like most mining names, the stock underperformed in 2013 and is down 41% from a year ago. The stock is up 5% today, however, and saw a flurry of activity late last week ahead of the rally.

AUY is up $0.45 to $9.62 Monday morning after the company updated it operation results for the fourth quarter and the full year 2013. Yamana said it produced 1.2 million gold equivalent ounces [GES], which was decidedly less than the 1.32 to 1.37 million it had estimated in July. The company also said it expects 1.4 million GES in 2014, which is at the low end of previous estimates of 1.4 to 1.5 million.

The stock is rallying on increasing volume of 3 million shares this morning despite the lowered forecast. AUY saw brisk trading of 9.2 million shares Friday as well and, on the options front, volume was 6.5X the daily average. Roughly 43,000 calls and 5,070 puts tarded on the stock. March 9 calls were the most actives. 32,435 contracts traded at a VWAP of $0.582 cents per contract. Open interest at that strike is now 18,156 (largest in the name) and, after today's advance in the shares, the market on those calls is $0.99 to $1.03.



It's not entirely clear what motivated the surge in interest in March 9 calls on Yamana Gold, but the timing was good because the contract has doubled in value from the prices seen Friday morning. The company's update didn't seem very bullish, but gold prices are up $13.60 to $1276.5 and the mining sector is broadly higher to start the week. Looking forward, the company's next test will be earnings, which are due out one week from tomorrow.

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At the time of publication, Henry Schwartz held no positions in the stocks or issues mentioned.


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