Put Buyers Jump on Slumping Newmont Mining Corp (NEM)

Puts are hot as Newmont Mining Corp (NEM) slides with gold on easing "Brexit" jitters

Jun 20, 2016 at 3:53 PM
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Newmont Mining Corp (NYSE:NEM) is taking a hit today, down 1.2% at $35.21, as gold prices slump along with easing "Brexit" concerns ahead of Thursday's referendum vote. The stock has been a serious outperformer this year, more than doubling in value from its January year-to-date low. But today, the options pits are buzzing with speculators betting on a continued slide for the shares.

NEM puts are changing hands at eight times their typical intraday rate, outnumbering calls by a 7-to-1 margin -- with put volume hitting an annual high. The July series is especially popular, accounting for nine of the 10 most active strikes. In the lead are the July 32 and 31.50 puts, where it appears some traders have been purchasing new positions. Buyers of the puts expect NEM to slide below the strikes by the close on Friday, July 15, when the front-month series expires.

Today's heavy appetite for puts simply exaggerates a recent trend seen in NEM's options pits. Across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 1.06 ranks in the 80th percentile of its 12-month range.

But short-term traders have been leaning on the call-heavy side recently. In fact, NEM's Schaeffer's put/call open interest ratio (SOIR) of 0.66 sits below nearly two-third of the past year's readings, and shows calls outnumbering puts among options set to expire in the next three months.

The stock could use a boost from the brokerage bunch. Despite NEM's strong technical performance in recent months, 69% of the analysts providing coverage maintain a lukewarm "hold" rating.

As alluded to, Newmont Mining Corp (NYSE:NEM) has been surging up the charts, with help from its supportive 40-day moving average. But that doesn't mean it will be smooth sailing ahead. The shares are now staring at a potential speed bump in the $37-to-$40 region, which represents a 50% Fibonacci retracement from its 2012 peak to its 2015 lows. Plus, peak call open interest in the July series sits at the 37 strike, which could translate into options-related resistance.

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