Gold Rally Sparks a Rush of Barrick Gold Corporation (ABX) Call Buying

Barrick Gold Corporation (USA) (ABX) calls are trading at two times the average intraday pace

by Karee Venema

Published on Apr 1, 2015 at 1:33 PM
Updated on Apr 20, 2015 at 5:32 PM

A dismal batch of economic data has gold trading higher, and commodity concern Barrick Gold Corporation (USA) (NYSE:ABX) is reaping the benefits of these gains. At last check, the shares were up 8.5% at $11.90 -- and on track to close north of their 80-day moving average for the first time since March 5. In the options pits, calls are changing hands at two times the average intraday pace, with a number of speculators betting on ABX to continue its run higher over the next two weeks.

Daily Chart of ABX Since April 2014 With 80-Day Moving Average

Specifically, the security's April 11.50 call has seen the most action today, and it appears a number of new positions are being purchased here -- a theory echoed by data from the International Securities Exchange (ISE). By buying the calls to open, traders expect ABX to extend its lead north of $11.50 through the close on Friday, April 17, when front-month options expire. Amid today's rally, delta on the call has jumped to 0.67 from 0.30, indicating an increased probability of an in-the-money finish.

Widening the sentiment scope reveals call buyers have been active in ABX's options pits in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 5.30 ranks in the 71st annual percentile.

The brokerage bunch, however, has taken a more skeptical stance toward a stock that's shed 36% over the past 52 weeks. Currently, 17 analysts cover Barrick Gold Corporation (NYSE:ABX), and 15 of those maintain a "hold" or worse recommendation, versus two "strong buys." Meanwhile, the average 12-month price target of $17.81 represents expected upside of 50% to ABX's present price -- and sits in territory not charted since early September.

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