Mining names stay hot in options-09/03/2009

Gold and silver prices rallied again today, making miners one of the hottest spots in the market for options traders.

More than 629,000 contracts traded on the sector today, 83 percent more than average, according to optionMONSTER's tracking systems. Miners, normally the sixth-busiest industry group, are the second busiest sector today, trailing only banks.

The heavy options action was a continuation of the pattern yesterday after an unexpected technical rally in gold left some traders scrambling for exposure. Both days, investors focused on less frequently traded precious-metals stocks such as Barrick Gold, Yamana and Newmont Mining, while neglecting more popular stocks exposed to industrial metals, such as Alcoa, Freeport-McMoRan and Vale do Rio Doce.

The GLD exchange traded fund, which tracks gold, rallied 1.60 percent to $97.73 after reaching a new six-month high. Heavy buying pushed call volume to more than three times average in the ETF. SLV, which follows silver, leapt 4.60 percent to $15.92. Options action was considerably more cautious in SLV, with put purchases accounting for half the total volume, according to optionMONSTER data.

The rally in silver also drew attention to some less closely followed stocks. Volume in Pan American Silver soared to more than five times average amid heavy buying of the September 21 calls and September 22.50 calls. Options volume was more than twice the average level in Silver Wheaton, which is highly leveraged to silver prices.

Overall in the mining space, 45 percent of the options volume was for September expirations, reflecting the relatively short durations of the positions implemented today.

(Chart courtesy of tradeMONSTER)

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