Shares of gold mining operator Kinross Gold Corp (KGC) are near a 52-week low even as gold prices have started to heat up. One trader sees the potential for a big move higher in the coming months.
That’s based on the July $6 calls. With 133 days until expiration, 5,825 contracts traded compared to a prior open interest of 146, for a 40-fold jump in volume on the trade. The buyer of the calls paid $0.34 to make the trade.
Shares of the gold mining company are down about 21 percent over the past year, even as the metal itself has performed better with a slight gain. Revenue is likewise down about 26 percent, but shares are now going for about 7 times forward earnings.
Action to take: Investors may like shares here as a hedge against various uncertainties, such as geopolitical events and inflation fears. The stock also pays a dividend yield of about 2.2 percent right now, which could increase if gold prices stay higher for longer.
For traders, the option is a good way to both hedge some current market fears and also profit from the upward trend in the commodity space as well. The options are cheap enough to potentially deliver triple-digit returns, although traders should be wary for anything that may derail gold’s current rally.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.