Since touching a 12-year low of $13.43 in July,
Barrick Gold Corporation
) has stair-stepped 35.7% higher to $18.23. However, option traders
are picking up puts at a near-annual-high clip, suggesting
speculators are either rolling the dice on a pullback for ABX, or
are locking in profits on their long stock positions.
On the International Securities Exchange (ISE), Chicago Board
Options Exchange (
), and NASDAQ OMX PHLX (PHLX), the commodity concern sports a
10-day put/call volume ratio of 0.82 -- higher than 92% of all
other readings of the past year. Or, in simpler terms, option
traders have picked up ABX puts over calls at a faster clip just 8%
of the time during the last 52 weeks.
Echoing that, the equity's Schaeffer's put/call open interest ratio
(SOIR) of 0.89 also registers in the 93rd percentile of its annual
range. In other words, near-term option traders have rarely been
more put-heavy over the past 12 months.
October series of options
-- which assumes front-month status after the closing bell on
Friday -- peak put open interest sits at the out-of-the-money 17
strike, with more than 20,200 contracts in residence. Meanwhile,
the deeper out-of-the-money October 15 strike harbors more than
19,600 puts outstanding, and the even deeper out-of-the-money
October 7 put has gotten some play, with almost 1,200 contracts
added during the past two weeks.
Assuming a healthy portion of the puts were bought to open, the
traders could be
protecting their ABX shares
. By purchasing the puts, the speculators lock in an acceptable
price at which to sell their shares (the strike price), should ABX
take a turn for the worse and breach the strike by expiration. The
buyers' primary goal, however, remains for ABX to extend its
uptrend, as they're shareholders above all else.
The mood isn't as ambiguous elsewhere on the Street. Just three out
of 19 analysts offer up "buy" or better opinions on ABX, which has
outperformed the broader
(INDEXSP:.INX) by 7 percentage points during the past two months.
In fact, the stock is trending higher this morning, despite ongoing
drama in the boardroom
Should Barrick Gold Corporation continue to stair-step higher, an
unwinding of puts in the options arena, or a wave of upbeat analyst
attention, could translate into contrarian tailwinds for the
This article by Andrea Kramer was originally published on
Schaeffer's Investment Research
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