Option players bet on gains in Gold Fields, Ivanhoe
Investors may be betting that the pullback in gold futures will be short-lived as they scoop up bullish options in Gold Fields and Canada’s Ivanhoe Mines.
Investors have been taking profits in gold futures ahead of the weekend following a breach of more than $1 000 an ounce last week.
US gold futures for April delivery settled down 10 cents at $942,50 an ounce on the COMEX division of the New York Mercantile Exchange on Friday.
On the New York Stock Exchange, US listed shares of Gold Fields, the world’s fourth gold producer, fell 1,75% to $10,12 while Ivanhoe shares rose 3,15% to $4,58 in afternoon trade.
One bullish options trade in Gold Fields appears to be taking advantage of bullion’s recent pullback as an investor took a longer-term bullish options position.
More than 9 600 GFI calls at the $17,50 strike price in the January 2010 contract traded for $1 apiece earlier in the session.
“Perhaps this investor is looking for value in the share price over the remainder of the year, expecting Gold Fields shares to rally by 75% with the stock value trading $10,05,” said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Connecticut.
In order to profit on the purchase, Gold Fields shares would need to rise to $18,50 and above by January expiration, he said.
Option players also appeared to be optimistic on Ivanhoe as about 28 000 contracts traded in its call options, which give buying rights to the stock.
The call volume was nearly 45 times the number of put options traded. Ivanhoe’s total option turnover was 24 times the normal level with sentiment based on order flow at 55% bullish, according to option analytics firm Trade Alert.
This time option investors were looking for an acceleration in Ivanhoe shares by mid-year as they focused on the right to buy its shares at $7,50 a piece by June expiration.
A total of 14 385 contracts traded in that strike, exceeding its open interest of 1 036 lots, Reuters data show.
“There’s a big surge in call buying in Ivanhoe today,” said Jon Najarian, a founder of webinformation site optionmonster.com, who noticed that one block of 9 000 contracts in the $7,50 strike call traded this morning.
“The call buying in Ivanhoe may be related to speculation that precious metals will remain strong as world economies remain weak,” said Scott Fullman, director of derivative investment strategy at broker-dealer WJB Capital Group. - Reuters