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Bulls Mining Kinross Gold

By Mike Yamamoto of OptionMonster

NEW YORK -- Precious-metals miners have lagged for months, but Monday's option activity in Kinross Gold (KGC) was hard to ignore.

 
More than 34,000 November 5 calls were purchased for 15 cents to 20 cents on Monday, according to OptionMonster's tracking systems. This is clearly fresh buying, as previous open interest in the strike was just 1,766 contracts.
 
These long calls lock in the price where the stock can be purchased through mid-November no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $5.
 
The highly bullish trading was cited by OptionMonster co-founder Pete Najarian cited on CNBC's "Halftime Report" Monday.
 
Kinross dropped sharply in mid-March along with other miners and the price of gold itself, and shares continued to drift lower for months after. The stock fell to $3.92 intraday on Friday, its lowest price since July 2002, but rebounded 2.04% to $4.01 Monday.
 
In its last quarterly report on May 7, the company's earnings results were in line with estimates while revenues surpassed expectations. Kinross' next quarterly report is scheduled for July 30.
 
Total volume reached 48,000 contracts Monday, more than seven times its daily average for the last month. Overall calls outnumbered puts by a bullish 20-to-1 ratio.
 
Najarian owns calls in KGC. Yamamoto has no positions in the name.

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

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