Options Trading News

March 27, 2013  Wed 10:23 AM CT

Traders keep trying to call a bottom in the gold miners, and now AngloGold Ashanti is finding favor.

optionMONSTER's Heat Seeker monitoring program detected the purchase of about 3,200 June 26 calls for $0.60 against open interest of 1,957 contracts. It dominated activity in the South African miner, leading calls to outnumber puts by a bullish 19-to-1 ratio.

The investor now has the right to buy AU for $26 on expiration, no matter how high it may be at the time. That will result in significant leverage if the shares rally, but the contracts will also become worthless if it fails to move. The benefit of the strategy is that it provides upside exposure to a bounce with limited risk. (See our Education Section for more.)

AU fell 1.29 percent to $23.43 in morning trading, and is down 39 percent in the last year. It's been falling along with precious-metal prices, and is now back to its lowest levels since early 2009. Other miners like Eldorado Gold and Iamgold have also seen bullish activity in recent sessions.

Total option volume in AU is almost triple average amounts so far today, according to Heat Seeker.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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