Traders have been bargain-hunting in the mining space, and
yesterday they turned to Barrick Gold.
optionMONSTER's Heat Seeker program showed the heavy volume in the
April 39 calls, with large blocks pricing for $0.63. More than
13,700 contracts traded by the end of the session, compared with
previous open interest of just 3,832, so these are new positions.
lock in the price where investors can buy shares. They can generate
significant leverage to their underlying share price because
options are much cheaper than stock. But if the shares don't move,
these contracts can also expire worthless. (See our
ABX fell 2.65 percent to $34.50 yesterday. Shares of the gold and
copper producer declined steadily between September 2011 and last
July. Since then the stock has returned near those summer lows, but
this time it's holding its ground.
Yesterday's option traders apparently think that Barrick is ready
to rebound, but they don't want to risk paying the full stock price
to get long. Instead, buying them calls will let them cheaply play
for a bounce.
Our scanners have picked up similar bullish trades in other miners
in recent weeks, including
Turquoise Hill Resources
Total option volume in ABX was more than twice its daily average
yesterday, with calls outnumbering puts by 6 to 1.
(A version of this post appeared on
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