Northern Dynasty Minerals has been plunging for the last four
months, but one investor is looking for a rebound.
optionMONSTER's Heat Seeker tracking system detected the purchase
of about 4,000 August 15 calls for $0.20 and the sale of a matching
number of August 20 calls for $0.15, resulting in a debit of $0.05.
Volume was below open interest in the higher-strike calls, so there
are two possible explanations for the trade. One is that an
existing position in the August 20s was rolled down to the August
15s, which will increase its delta from 0.04 to 0.08. That means
it's twice as sensitive to movements in the Canadian gold company's
underlying share price.
The second possibility is that both positions were opened. Then the
transaction was a bullish call spread, which would make money if
NAK pushes above $15.05, with a maximum potential profit of 9,900
percent at or above the $20 level. (See our Education section)
NAK rose 2.14 percent to $8.59 on Friday. It more than tripled
between late 2010 and early February, but then rolled over and
proceeded to lose about 60 percent of its value. The company owns
half of Alaska's giant Pebble formation, though it's still several
quarters away from making money.
The stock also appeared on Heat Seeker last month when investors
purchased about 5,000 November 15 calls in hope of a rebound.
Overall option volume in NAK was 9 times greater than average on
Friday, with calls outnumbering puts by 38 to 1.
I own NAK shares.
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