The Perfect Gold Stock For Options Bulls Right Now

KL just picked up a price-target hike from BofA Global Research, too

Lillian Currens
Aug 5, 2020 at 11:03 AM
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Gold stocks have been getting some attention lately, with the commodity's seemingly unstoppable rally in focus, as many sector members charge toward fresh highs. One such stock getting a halo lift is Kirkland Lake Gold Ltd (NYSE:KL). The equity just charged toward its fourth consecutive record high, boosted by a price-target hike from BofA Global Research, and is trading up 3% at $57.24 at last check. The rally might not be over just yet though, as these all-time-highs coincide with historically low implied volatility (IV), which has been a bullish signal for KL in the past. 

A study from Schaeffer's Senior Quantitative Analyst Rocky White shows two other times in the past five years when the stock was trading within 2% of its 52-week high, while its Schaeffer's Volatility Index (SVI) sat in the 20th percentile of its annual range or lower. This is the case with KL's current SVI of 51.4%, which stands just below the 19th percentile of its annual range. White's data shows one month after each of these signals, the security was higher, averaging a one-month return of 16.8%. 

In addition to having relatively cheap options at the moment, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 85 out of 100. This means Kirkland Lake Gold stock has tended to exceed option traders' volatility expectations during the past year, a good thing for options buyers. 

Options players are already overwhelmingly bullish on Kirkland Lake Gold. In the last 10 weeks, almost 11 calls were picked up for every put at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits in the 86th percentile of its 12-month range, suggesting this penchant for long calls is unusual.

Digging deeper, it has been an impressive couple of months for KL, which broke free from long-time pressure at the $44 level in mid-July with help from its 10-day moving average. The stock boasts a 217.6% gain off its mid-March trough, and a 30% lead for the year. 

KL Chart Aug 5


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