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March 14, 2014  Fri 11:24 AM CT

SBGL: SEE CHART GET CHAIN FIND STRATEGIES
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.
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So far, my articles have taken you through a logical progression of option theory and fundamental concepts of options. As of yet, I have not mentioned a single strategy and for a good reason! The actual application of a strategy should come AFTER you learn about the option product itself.

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