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Barrick Gold Corporation (USA) (NYSE:ABX) speculators are projecting a short-term pop higher in the shares, and are expressing this outlook through the purchase of weekly options. In Monday's session, the most active ABX option was the weekly 9/27 19-strike call, where the majority of the 4,010 contracts that traded went off at the ask price. Implied volatility rose 5.3 percentage points at the strike over the course of the day, suggesting buying demand (which data from the International Securities Exchange [ISE] confirms).
Open interest increased by 2,501 contracts overnight, confirming new long positions were opened here. The calls were scooped up at a volume-weighted average price (VWAP) of $0.31, so breakeven at expiration (at the end of this week) is $19.31 (the strike price plus the VWAP).
From Barrick Gold's current price of $18.49, the stock will need to advance 4.4% in the next four trading sessions (including today) in order to put yesterday's call buyers in profitable territory. If ABX continues to trade below the 19 strike, the traders will merely lose the modest premium paid. Currently, this is a likely scenario; the option's delta reading of 0.29 indicates a less than 1-in-3 chance ABX will be sitting north of $19 by Friday's closing bell.
In negative territory in 2013 and on a year-over-year basis, ABX has been in recovery mode in recent weeks. Since its July 5 low of $13.43, the stock has appreciated more than 37%. Yesterday's trades may have represented a bet that ABX was headed back toward the top of its recent trading range (around the $20.50 mark) to close out September.
This "vanilla" call-buying activity was a change of pace for Barrick Gold Corporation (USA) (NYSE:ABX), which has recently been targeted by bearish spread strategists and out-of-the-money put buyers (both of whom may be conservative shareholders in disguise).
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