Options Trading News

April 12, 2013  Fri 4:45 AM CT

Eldorado Gold has fallen to its lowest level in nearly four years, but one trader is betting on a rebound.

More than 5,100 May 9 calls were purchased for $0.20 in about 2 minutes yesterday afternoon, according to optionMONSTER's Heat Seeker system. The volume was more than 10 times higher than strike's open interest of just 486 contracts before the session began, clearly showing that this is fresh buying.

The long calls, which lock in the price where traders can buy the stock, are looking for EGO to rise above $9.20 in the next five weeks. These options could be sold earlier at a profit if premiums rise with a rally before then, but they will expire worthless if the shares remain below the $9 strike price. (See our Education section)

EGO slipped 1.49 percent yesterday to finish at $7.96. That is just pennies above the low of $7.91 reached on April 4, its worst intraday price since June 2009. The Canadian company, which has been falling for months along with other miners as the price of gold has dropped, is scheduled to release first-quarter results on May 2 after the close.

Of the 6,933 total options that changed hands in the name yesterday, only 329 were puts--a reflection of the session's bullish sentiment.
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