Stocks quoted in this article:
Barrick Gold Corporation (USA) (NYSE:ABX) calls are outpacing puts by a greater than 2-to-1 margin this afternoon -- though both types of options are trading at more than three times their typical intraday pace. That said, the stock's 30-day at-the-money implied volatility (IV) has spiked 6.7% to 33.6%, indicating stronger-than-usual demand for short-term options.
The most active ABX strike, however, is the intermediate-term October 20 call, where more than 6,100 contracts are on the tape. Nearly all of the volume has gone off at the ask price, IV is trending higher, and open interest at the strike consists of just 1,577 contracts -- collectively signaling buy-to-open activity.
In short, these traders expect ABX shares to rally north of $20 by October options expiration, roughly six months from now. Delta on the out-of-the-money contracts is 0.29, representing a 29% chance of an in-the-money finish. If the stock is sitting below the strike price when the contracts expire, buyers who are still holding onto their bullish positions will forfeit the entirety of the initial premium paid.
Today's penchant for long ABX calls over puts is business as usual for the gold miner. The equity's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) registers at 6.93 -- just 7 percentage points shy of an annual high.
Technically speaking, however, Barrick Gold has struggled. The shares are off 4.3% today at $17.20 -- as merger talks with Newmont Mining Corp (NYSE:NEM) have stalled -- dropping the stock into the red on a year-to-date basis. In fact, ABX hasn't traded north of the $20 level in over a month.
Finally, on the fundamental front, Barrick Gold Corporation (USA) (NYSE:ABX) is scheduled to step into the earnings confessional before the open next Wednesday. Wall Street is calling for a profit of 18 cents per share for ABX's first quarter, compared to a year-ago result of 92 cents per share. Historically, ABX has beaten the bottom-line consensus view in just four of the past eight quarters, and has given up an average of 3% in the subsequent week.