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Bullish Betting Picks Up On Barrick Gold Corporation (USA) (ABX)

Longer-term traders are eyeing the $20 level for Barrick Gold Corporation (USA)

by 6/9/2014 12:38 PM
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Barrick Gold Corporation (USA) (NYSE:ABX) call volume is running at roughly 20 times the pace of put volume this afternoon. Specifically, 20,000 calls are on the tape, versus just over 1,000 puts. Plus, the mining stock's 30-day at-the-money implied volatility (IV) is up 7.2% at 29.2%, signaling increased demand for short-term contracts.

Commanding the most attention, however, is ABX's longer-term October 20 call. Nearly 15,000 contracts have changed hands here -- 97% at the ask price, suggesting they were bought. What's more, IV is on the rise, and data from the International Securities Exchange (ISE) indicates a fair amount of buy-to-open activity at the out-of-the-money (OOTM) strike.

By purchasing the calls at a volume-weighted average price (VWAP) of $0.25, today's traders expect ABX will rally above $20.25 (strike plus VWAP) by October options expiration, more than four months from now. Above breakeven, profits on the call are theoretically unlimited. By contrast, the most the speculators have on the line is the initial premium paid, which they'll sacrifice if they're holding onto OOTM calls at expiration.

On the technical front, ABX is a long-term laggard, shedding nearly 21% in the past year. What's more, the shares continue to face overhead resistance at their descending 20-day moving average. At last check, the stock was hovering around $16.03.

Nevertheless, bullish betting has picked up on Barrick Gold Corporation (USA) (NYSE:ABX). During the last 10 weeks at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity has racked up a call/put volume ratio of 5.78 -- just 10 percentage points from a 52-week high. Should these option bulls begin to hit the exits in light of ABX's continued technical struggles, the stock could encounter additional headwinds.


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