With the May series of options expiring after today's close,
traders stocked up on June-dated calls on
Barrick Gold Corporation (
) during Thursday's session. The day's most active strike was the
ABX June 25 call, where 3,604 contracts crossed the tape. Nearly
all of these contracts traded closer to the ask price, suggesting
they were purchased, and open interest rose overnight by 1,183
contracts -- confirming the addition of new long calls on the gold
Also in play was Barrick Gold's June 19 call, which traded volume
of 2,389 contracts. More than three-quarters of these calls changed
hands at the ask price, and 2,000 of those contracts translated
into new open interest.
Those June 25 calls traded at a volume-weighted average price
(VWAP) of $0.10, which means traders will begin to profit if ABX
rises above breakeven at $25.10 (strike price plus VWAP) prior to
back-month expiration. Meanwhile, the VWAP on the June 19 calls was
$1.17, placing breakeven at $20.17.
For the record, ABX settled Thursday at $19.26, bringing its
year-to-date loss to roughly 45%. Unsurprisingly, the lagging stock
has become a favorite among
, with short interest surging by 48.6% during the most recent
In light of this fact, it's possible that some of the
out-of-the-money call volume on Barrick Gold Corporation could be
related to increased hedging activity by the shorts. While those
June 19 calls aren't too far away from being profitable, ABX would
need to rally more than 30% over the next month for Thursday's June
25 call buyers to turn a profit.
This article by Elizabeth Harrow was originally published on
Schaeffer's Investment Research
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