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Yamana Gold's Jump Jolts Options Traders

AUY's journey to new highs has captured the attention of put traders

by 9/13/2012 2:23 PM
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Like many equities this afternoon, commodity concern Yamana Gold Inc. (USA) (NYSE:AUY - 18.27) just tagged a multi-year high. Against this backdrop, options traders are employing puts to bet on short-term support for the security.

At last look, AUY has seen more than 7,100 puts cross the tape -- nearly four times its typical intraday put volume. Much of the action has changed hands at the September 17 strike, which has seen around 2,800 puts traded on open interest of fewer than 2,100, pointing to newly initiated positions. However, 84% of the now out-of-the-money puts have crossed at the bid price, suggesting they were sold.

By writing the puts to open, the sellers are expecting AUY to remain north of the $17 level through the next week or so. In this best-case scenario, the puts will expire worthless, allowing the traders to pocket the entire premium received at initiation.

Widening our sentiment lens, today's preference for short puts stands in stark contrast to the recent trend on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, AUY's 10-day put/call volume ratio on the exchanges sits at 0.48 -- in the 91st percentile of its annual range. In other words, options traders have bought to open AUY puts over calls at a near annual-high clip during the past couple of weeks.

As a result, the equity's Schaeffer's put/call open interest ratio (SOIR) sits at 0.52 -- higher than 79% of all other readings of the past year. Or, simply put, AUY's short-term options crowd is more put-heavy than usual at the moment.

After topping out at $18.44, the shares of AUY were last seen 5% higher in the $18.27 neighborhood. Bolstering the security -- as well as gold futures -- was the Federal Reserve's highly anticipated monetary-policy statement, which, as expected, included plans for "QE3."


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