Unusual Options Activity: McEwen Mining (MUX)

Gold mining and exploration company McEwen Mining (MUX) has seen shares rally 34 percent in the past year, nearly triple the return on the S&P 500. One trader is betting on a further rally in the next few months.

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  • That’s based on the February $8 calls. With 81 days until expiration, 22,960 contracts traded compared to a prior open interest of 226, for a 102-fold jump in volume on the trade. The buyer of the calls paid $0.50 to make the bullish bet.

    McEwen shares recently traded just over $7, and would need to rise about 12 percent in just under three months. That would also put shares much closer to their 52-week high of $10, set last April.

    The gold miner has seen revenues rise, up 48 percent over the past year.

    Yet the operations have still been at a loss, even with gold flirting with the $2,000 per ounce range once again. Still, McEwen has ample cash to handle any short-term challenges in the months ahead.

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  • Action to take: Investors interested in the precious metals space may like shares. Mining stocks can outperform the metal itself during a bull market. At present, McEwan doesn’t pay a dividend.

    For traders, the February calls are an inexpensive bet on shares, and a big jump higher could lead to high-double-digit returns or better.

     

    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.

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