Options Trading News

March 14, 2014  Fri 11:24 AM CT

South African gold miner Sibanye Gold has been on the rise, but a large trader apparently believes that further gains will be limited.

optionMONSTER systems detected the sale of 6,950 October 12.50 calls for $0.50. This is clearly a new position, as the volume was more than twice the total open interest in the name and eclipsed its total daily average turnover of just 167 contracts.

The call seller is betting that SBGL will stay below that $12.50 level through expiration in mid-October. A minute after that trade, a block of 219,600 SBGL shares was bought for $9.60.

The combination of stock and short calls creates a delta-neutral play that is looking for lower volatility than that implied by the option premium. The implied volatility of those October calls is 55 percent, while the 20-day historical volatility for the stock is 39 percent. (See our Education section)

SBGL is off 0.87 percent to $9.68 in midday trading, a day after reaching a high of $9.91. Shares were below $5 into the middle of January.
Share this article with your friends


Premium Services

Archived Webinar

Education & Strategy

The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

View more education articles »