Unusual Options Activity: Newmont Corporation (NEM)

Shares of gold mining firm Newmont Corporation (NEM) have shed 27 percent of their value over the past year, as gold has failed to keep up with inflation. One trader sees the potential for a rebound in the months ahead.

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  • That’s based on the December $50 calls. With 137 days until expiration, 5,411 contracts traded compared to a prior open interest of 314, for a 17-fold rise in volume on the trade. The buyer of the calls paid $0.80.

    Shares recently traded around $45, so they’d have to rise more than 10 percent to move in-the-money before the option expires. That would still leave the stock well under its 52-week high near $86.

    While gold prices haven’t moved down as much as other assets, rising fuel prices and inflationary pressures are curbing profitability. Revenue is flat at the company over the past year, but earnings are down nearly 40 percent.

    Action to take: Gold can be cyclical at times. With shares closer to a 52-week low than a 52-week high, now may be a good time to start buying shares with an eye towards taking quick profits on gold’s next pop higher. Shares currently pay a 4.8 percent dividend, but that may be cut if profitability continues to drop.

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  • For traders, the options look like an inexpensive way to bet on a move higher in gold in the next few months. The options can likely deliver mid-double-digit gains in the months ahead. Look to take quick profits.


    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.