Barrick faces downside strategy at lows
David Russell | [email protected]
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.