How trader is playing Harmony Gold
David Russell | [email protected]
optionMONSTER's monitoring systems detected the sale of 17,800 November 4 calls, with large blocks pricing for $0.54 to $0.58. A similar number of November 5 calls were sold around the same time for $0.27 to $0.30, but volume in that strike was close to open interest of 16,957.
There are two possible interpretations of the transaction, which generated a credit of about $0.28. One is that an investor had previously sold the November 5s, closed the position, and rolled it down to the 4s. In that case, the trader is effectively lowering by $1 the level where he or she is short the South African gold miner.
The other possibility is that both sides of the trade were new opening positions, in which case this is a call credit spread. That would also earn its maximum profit below $4. (See our Education section)
HMY fell 0.73 percent to $4.08 yesterday and has lost more than half its value since the beginning of the year. Gold miners have been steadily losing money as big investors liquidate holdings of precious metals while tame inflation keeps new buyers at bay.
Total option volume in HMY was 25 times greater than average in the session.