Call Players Target Soaring Yamana Gold Inc. (AUY)

Yamana Gold Inc. (USA) (AUY) is attracting weekly call buyers as the shares rally to a new annual high

Kirra Fedyszyn
Jun 8, 2016 at 11:17 AM
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As gold futures resume their recent rally this morning, Yamana Gold Inc. (USA) (NYSE:AUY) is tracking higher, last seen up 5% at $5.25, after tapping an annual high of $5.34 earlier in the session. While stock volume is currently running in the 98th percentile of its 12-month range, options traders have also been quick to respond, with calls changing hands at roughly twice their average intraday rate.

At last check, call volume was on pace to finish in the 93rd percentile of its annual range, with 5,520 contracts on the tape this morning, compared to 826 puts. Among the most active calls so far is the weekly 6/10 5-strike call, where it appears traders may be buying to open new positions. If so, these call buyers are betting on AUY to extend its rally above the $5 level through the close on Friday, when the weekly option expires.

Of course, today's preference for long calls is par for the course in AUY's options pits. Though volume has been relatively light in absolute numbers, the stock has racked up a 10-day call/put volume ratio of 16.90 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Moreover, this top-heavy ratio sits higher than 74% of comparable readings taken in the past year.

Elsewhere, it looks like bearish traders have been backing off. Short interest on the stock fell by nearly 18% during the most recent two-week reporting period, and now accounts for less than 2% of AUY's available float. Still, the security could stand to benefit from more bullish analyst attention. At the moment, more than half of the brokerage firms providing coverage maintain a "hold" or "strong sell" recommendation, and the average 12-month price target of $4.60 represents a substantial discount to the shares' current value.

Technically speaking, AUY has had an outstanding year so far, adding a jaw-dropping 182% in 2016. The shares recently pulled back to the $4.20 level, which served as resistance in early 2015, and roughly coincides with the stock's 50-day moving average. Since then, however, Yamana Gold Inc. (USA) (NYSE:AUY) has surged sharply higher, closing above $5 for the first time since October 2014.

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