Gold miners have been among the worst performers in the market, and traders are lowering the bar on three names in the space.
optionMONSTER's monitoring program detected a flurry of call volume today in Agnico-Eagle Mines, Yamana Gold, and AngloGold Ashanti, but it wasn't bullish. The first transaction occurred in AEM, with more than 1,000 May 50 calls bought for $0.32 and a similar number of May 42.50 calls sold for $1.43.
Minutes later, the AUY July 19 calls were bought for $0.17 and the July 16s were sold for $0.58 (see related story ). In AU, investors bought 1,040 March 25 calls for $0.14 and sold the March 23s for $0.99.
All three trades were very similar, with volume below open interest at the higher strike. It appears the investors had previously sold those contracts and are now rolling the short positions down. That allowed them to receive more income, while also lowering the level at which they will have to sell their shares.
Known as a covered call , the strategy is often used to manage long positions. The income generated reduces the cast basis, while also providing a hedge against a drop. (See our Education section for more on how options can be used to manage risks.)
Today's trades, which reflect a dim outlook for the miners, follows a drop in gold recently as major investors including John Paulson and George Soros reduced exposure. Gold miners as a group are down more than 25 percent in the last three months, according to our proprietary researchLAB analytic tool.
AEM is down 2.15 percent to $39.23, AU dropped 2.12 percent to $23.54 and AUY is down 4.74 percent to $14.08.
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