Bulls Step In as Goldcorp Gets Smacked

By Pete Najarian, co-founder of OptionMonster

NEW YORK -- Goldcorp ( GG) fell again Wednesday, but option traders are feeling bullish about the miner.

There was heavy activity Wednesday in the July 44/July 50 call spread, which will leverage a rebound in the precious-metals company. Traders bought the July 44 calls for $2.24 and sold the July 50s for 67 cents, translating into a cost of $1.57. More than 4,300 contracts traded in both.

Owning calls locks in a $44 entry price and an exit price of $50, giving traders the right to collect the $6 difference. That amounts to a profit of about 280%, given the $1.57 cost to open the position, but the trade will make that money only if the stock rallies to $50 by expiration in three months.

Goldcorp tumbled 5.55% to close at $41.14 Wednesday after hitting a 52-week intraday low of $40.55 as gold prices got hammered again Wednesday. That follows losses on Tuesday after Citigroup downgraded the stock.

Almost 42,000 calls traded in the name versus 16,600 puts, reflecting the day's which is bullish option trades. Total volume was also five times greater than its daily average.

Najarian has no positions in GG.
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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