Unusual Options Activity: Barrick Gold (GOLD)

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  • December call buying indicates further rally in shares.

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  • Gold mining companies have been doing well this month, as gold prices have risen along with market fears. Traders continue to bet on the space moving higher, with a big trade on Wednesday in shares of Barrick Gold (GOLD).

    Over 3,100 contracts on the December 2019 $23 calls on shares traded, a 16-fold increase in the prior open interest just under 200 contracts. With a current share price just over $18, the option is a bet on a 25 percent rise by the holidays. With a current share price just over $18, the option is a bet on a 25 percent rise by the holidays.

    Barrick Gold is one of the “major” producers of metals, with global operations and some of the lowest-cost mining operations. It may not be as speculative as some of the smaller plays, but the company’s profitability will improve if gold prices continue to rise.

    Action to take: Although shares of Barrick gold are now up 74 percent in the past year, there’s more room to run as markets look for a safe-haven trade. Barrick looks a bit expensive at 31 times earnings, but gold mining companies tend to have poor earnings when gold is out of. Investors looking for a safe-haven should look at shares.

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  • Traders should look at the December $23 calls, which are an inexpensive bet on a further rally in gold at $0.50 right now, or about $50 per contract.