Unusual Options Activity In Barrick Gold (ABX)

| January 21, 2015 | 0 Comments

Unusual Trading VolumeUnusual Options Activity in Barrick Gold (ABX)

As many of you know, unusual options activity can be a valuable indicator as to what traders are thinking, and more importantly, where these stocks are heading in the short-term.

This is something professional options traders pay a lot of attention to, and for good reason… Unusual options activity can “tip off” big moves in a stock, either up or down.

So let’s take a look at some ‘interesting’ activity that caught our eye this week:

Barrick Gold (ABX) is one of the largest public gold mining companies in the world. The Canadian-based company holds gold interests all over the world. Check here for more info on the company.

Over the last year, ABX is down 35%. The current share price of $12.60 is 40% from the 52-week high of $21.20 and 26% off the 52-week low of $10.04.

So what does unusual options activity in ABX tell us?

After a long period of slow decline, the price of gold finally got a boost this past week. In fact, the yellow metal is up over $100 per ounce since the year began. Global economic and currency turmoil are the primary reasons behind the reversal.

At least one investor believes the turnaround in gold is going to continue into March.

Here’s the deal…

A trader bought 16,000 March 10 calls in ABX for the price of $1.27 per call. A call option makes money when the stock goes up (prior to expiration).

With a straight call buy like this, the trader can only lose the $1.27 per call spent on the trade. Still, that’s over $2 million in this case. But keep in mind, the gains on a naked call are unlimited if the stock keeps going up.

The breakeven point on this trade is $11.27 (the strike price plus the price of the call). But, it looks like a smart move because the stock is nearly $1.50 over the break-even point already!

To put that into dollar terms, if the trader sold out the calls right now, he or she would make over $2 million! How’s that for a savvy trade?

Here’s the chart of ABX:

unusual option activity, a chart of ABX

As you can see from the chart, the call buyer got in at the right time. With the stock price closing above the important 50-day moving average line, the shares could be in for even bigger gains (next stop could be the 200-day moving average). In other words, the trader may already be successful on this trade, but the good times may just be getting started.

More Options Trading Ideas…

Keep in mind, there’s a lot more unusual options activity going on than what we discuss here.

We just try to bring you what we feel are the most significant ones– and the ones you might actually be able to make some money on!

Yours in Profit,

Gordon Lewis
Options Trading Research

Gordon Lewis has been trading options for more than 15 years and he now writes and edits for Optionstradingresearch.com. You can sign up for the newsletter and get a free research report. We are your go-to source for top notch options trading research.

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Category: Unusual Options Trading Activity

About the Author ()

Gordon Lewis is the Chief Investment Strategist and editor for the popular daily newsletter – Options Trading Research. He’s also editor of our dynamic theme-based options trading service, Advanced Options Adviser, and one of the key analysts behind the highly successful Options Trading Wire.