OptionsHouse

Options Trading News

April 26, 2013  Fri 3:16 AM CT

ABX: SEE CHART GET CHAIN FIND STRATEGIES
Barrick Gold is trying to dig itself out of a hole, but one big investor remains bearish.

optionMONSTER's Depth Charge tracking program detected the purchase of 5,343 October 19 puts for $2.25. Equal numbers of contracts were sold in the October 16 puts for $0.96 and October $0.24 calls for $0.76. Volume exceeded open interest at all three strikes, indicating that new positions were initiated.

The trade cost $0.53 and will earn a maximum profit of 466 percent if the stock closes at or below $16 on expiration. They must also sell shares for $24 if they go above that level, so he or she may already own the stock and simply want to hedge against another drop.

ABX rose 0.79 percent to $19.06 yesterday but has lost more than half its value since October amid a collapse in the precious-metals market. The recent selloff brought the stock back to levels last seen at the darkest moments of the 2008 financial crisis.

Yesterday's bearish option trade combines elements of a vertical spread and a collar strategy. (See our Education section)

Some 163,500 contracts changed hands in the name yesterday, more than twice the daily average.
Share this article with your friends


OptionsHouse

Premium Services

Education & Strategy

Real vs. Synthetic

We now know that there are two ways of creating a call position, a put position, and a stock position. We can simply use the actual real security or we can recreate it synthetically. We can create these positions in both long and short forms and this ability sets up an interesting scenario--an arbitrage!

View more education articles »