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.
Disclosure: I own NAK shares.
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.