Options Trading News

A trader is using long-term options to play Newmont Mining instead of taking a direct position in the stock.

NEM is up 0.98 percent to trade at $55.80 this morning as precious metals run higher. The gold and copper producer was holding above $56 last week, trading just shy of $58, its highest levels since the start of March. The shares formed a double bottom at $44, the second bounce coming in early August.

Topping the option volume in the name is the action in the January 2014 57.50 puts. These contracts traded for $10.30 against open interest of 2,077 and appear to have been bought.

Long-term put buying, especially in the money, is a strategy that is sometimes used instead of shorting a stock. The trade requires less capital to get downside exposure and carries far less risk than shorting if the stock runs to the upside. The option buyer can lose only the premium of the put, while a short seller has theoretically unlimited loss potential. (See our Education section)