Markets

Call seller takes a dim view of Yamana

One investor thinks that Yamana Gold is losing its shine.

The Canadian mining stock has significantly outperformed its peers in the last year but peaked around $17 earlier in the month. And yesterday's option activity is betting that AUY won't be going higher than that.

Some 18,000 April 17 calls were sold for $0.59 against open interest of just 2,216 contracts. About 16,000 April 20 calls were bought at the same time for $0.22, but volume was below previous positioning. That leaves two possible explanations for the activity.

One is that the investor owns AUY shares and had sold the April 20s at an earlier date as part of a covered call position. He or she could have rolled the position to the lower strike, which would have signaled a willingness to exit the stock for $3 less and shown limited optimism toward the name.

Alternatively, both trades may have been opened, in which case it would be a call credit spread . That strategy is designed to earn income from the passage of time . It also expresses a belief that AUY will stay below $17. (See our Education section)

AUY rose 4.99 percent to $14.73 yesterday and is up 14 percent this year. In contrast, the broader gold-mining industry has dropped 14 percent in the same period.

The call activity pushed total option volume in AUY to 9 times greater than average in yesterday's session.

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

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


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

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