Calls Hot As Barrick Gold Corporation (ABX) Hits New High

Options traders are showing more optimism than usual after Barrick Gold Corporation (ABX) surged to a two-year high

by Kirra Fedyszyn

Published on Jun 16, 2016 at 10:52 AM
Updated on Jun 24, 2020 at 10:16 AM

Gold is soaring to multi-year highs this morning on the heels of Wednesday's dovish Fed talk. Barrick Gold Corporation (USA) (NYSE:ABX) is among the gold stocks getting a boost, last seen up 3% at $21.12, after hitting a two-year high of $21.40 out of the gate. Today's rally has bullish action heating up in the stock's options pits, but not everyone has been rooting for ABX lately.

Call options are crossing at twice their expected intraday rate today -- more than doubling put options -- with more than 20,000 on the tape already. Receiving notable attention is ABX's June 20 call, where it appears some traders are purchasing new positions, expecting the shares to hold above the $20 level through tomorrow's close, when the front-month option expires. Meanwhile, it appears more ambitious speculators may be buying to open January 2017 25-strike calls, betting on ABX rallying to yet another multi-year high over the next seven months.

More broadly speaking, options traders have been unusually bearish toward the outperformer. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day put/call volume ratio of 0.71 -- while showing long calls outnumber puts on an absolute basis -- ranks higher than nearly three-fourths of the past year's readings. In other words, puts have been bought to open relative to calls at a faster-than-usual clip.

Likewise, short-term traders have been unusually put-heavy toward the stock. ABX holds a Schaeffer's put/call open interest ratio (SOIR) or 0.81 -- in the high 77th percentile of its annual range. What's more, put open interest on ABX currently sits in the 99th percentile of its 12-month range.

Analysts are still showing hesitance toward ABX, too, with 12 out of 16 maintaining a "hold" or worse recommendation. Plus, the average 12-month price target on the stock sits well underfoot, at $17.10. A round of upgrades and/or price-target hikes from the brokerage bunch could help ABX trek even higher.

From a technical standpoint, ABX has had an explosive year so far, adding 186%. The shares recently bounced off of long-standing support at their 50-day moving average. This helped ABX to soar through congestion at the round-number $20 level, which could serve as support for Barrick Gold Corporation (USA) (NYSE:ABX) going forward.

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