Heavy call selling hits gold miners

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Precious metals have been weak, and options trades painted a bleak picture yesterday for several miners in the sector.

optionMONSTER's tracking programs detected heavy call selling in several companies yesterday, starting with Kinross Gold about halfway through the morning. Some 4,572 August 4 calls were sold for $0.17 and an equal number of August 5s calls were bought for $0.09. Volume was below open interest in the 5s, which suggests an existing short position was rolled to the lower strike.

Writing calls obligates an investor to sell a stock, making him or her effectively short. Rolling a short position lower cuts the level at which they must provide shares to the market and reflects dimmer expectations for a rally. (See our Education section)

Similar activity followed in Sibanye Gold of South Africa. This time, they bought back the October 12.50 calls for $0.40 and sold the October 10s for $1.02, netting $0.62 but also lowering their sell level by $2.50. About 7,000 contracts traded at each strike.

Toronto-based Yamana Gold appeared 20 minutes later, with 10,500 of the October 11s bought for $0.06 and 10,500 of the October 9 calls sold for $0.14.

KGC fell 2.36 percent to $3.73 and is back to its lowest level since early 2002, and AUY dropped 1.79 percent to a five-year closing low of $7.12. SBGL declined 3.27 percent to $9.76.

Primero Mining, which operates in Mexico and Canada, also saw its January 7.50 calls sold for $0.50. PPP fell 3.57 percent to $6.48.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.


This article appears in: Investing , Options

Referenced Stocks: KGC

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