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Option Brief: Yamana Gold Inc. (USA) (NYSE:AUY) calls are trading at 11 times the average intraday rate, with roughly 26,000 contracts exchanged in the first two hours of the session. Furthermore, the security's 30-day at-the-money implied volatility (IV) is 2.8% higher at 39.5%, echoing the demand for short-term contracts.
Nearly all of the volume has transpired at the July 9 call, where close to 21,400 contracts have changed hands. About 80% of the calls crossed closer to the ask price, IV is 1.9 percentage points higher, and just 3,401 contracts are docked at the July 9 call -- all signs of buy-to-open activity.
The buyers expect AUY to extend its ascent beyond the $9 level through July options expiration. More specifically, the speculators will make money if AUY is sitting north of $9.93 (strike plus volume-weighted average price of $0.93) when the options expire at the close on Friday, July 18. Delta on the calls sits at 0.61, implying a roughly 61% chance of the contracts settling in the money. Risk, meanwhile, is capped at the initial premium paid for the calls, should AUY backpedal beneath $9 within the options' lifetime.
At last check, Yamana Gold Inc. (USA) (NYSE:AUY) is up 2.4% at $9.30, as gold futures edge higher after encouraging consumer sentiment data. From a longer-term perspective, the equity is 7.8% higher in 2014, and has outperformed the broader S&P 500 Index (SPX) by about 5 percentage points during the past 60 sessions.