Options Trading News

January 22, 2013  Tue 3:16 AM CT

Barrick Gold has been trapped in a range for the last two months, and one bullish trader is buying more time for shares to break out.

optionMONSTER's Heat Seeker system shows that the trader sold 5,425 April 36 calls for an average price of $1.03 and bought the same number of July 37 calls for about $1.38. Volume was below the previous open interest in the April options but below it in the July contracts.

This indicates that the trader is closing the earlier-dated calls and rolling the position forward in time to a higher strike. The adjustment cost a net $0.35 and provides another three months of upside exposure while raising the strike price by $1.

The new long calls, which lock in the price where traders can buy stock, are looking for ABX to be above $37 by mid-July. These options could be sold earlier for a profit if their premiums rise with any rally before then, but they will expire worthless if the shares don't reach that level. (See our Education section)

ABX slipped 0.12 percent on Friday to close at $34.04, just below its 50-day moving average. The Toronto-based gold and copper producer has been trapped between $33 and $36 since mid-November, far from its 52-week highs around $50 from last February.

Bargain hunters have been targeting beaten-down miners as precious metals have begun to recover from recent losses, and Barrick is no exception. In addition to Friday's action, ABX saw bullish call buying in the April 39 contracts on Jan. 10.

The company is scheduled to release fourth-quarter results on Feb. 14.
Share this article with your friends


Premium Services

Upcoming Webinar:

Using Options For Income


Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »