The $1.3M Bet Against Barrick Gold Corporation (USA) (ABX)

Several huge options trades have gone off on Barrick Gold Corporation (USA) (ABX) today

by Alex Eppstein

Published on Aug 4, 2016 at 2:33 PM

It wasn't long ago that Barrick Gold Corporation (USA) (NYSE:ABX) was flirting with three-year highs. Even after pulling back slightly to its 40-day moving average, the gold stock -- at $22.45 -- is just a chip-shot from its July 6 peak of $23.47. Yet, options traders are betting bearishly this afternoon.

Right now, ABX put options are crossing the tape at 1.6 times the expected intraday pace, and almost five times the rate of calls. In fact, intraday put volume ranks in the high 92nd percentile of its annual range, while the stock's intraday put/call volume ratio of 4.67 represents the highest mark registered in the past 12 months.

According to Trade-Alert, a 5,500-contract sweep of in-the-money September 24 puts was bought to open earlier for $2.29 apiece -- resulting in a total net debit of nearly $1.3 million (premium paid * number of contracts * 100 shares per contract). On the face of it, the goal is for ABX is finish below breakeven at $21.71 (strike less premium paid) by the close on Friday, Sept. 16, when the options expire.

Similarly, it looks like a block of 5,290 contracts and a sweep of 2,678 contracts were bought to open at the deep out-of-the-money August 18 put. These buyers may be gambling on ABX dropping south of $18 by front-month expiration, at the close on Friday, Aug. 19. Alternatively, they could be shareholders protecting themselves against a precipitous sell-off in the gold stock. Whatever the case may be, the most the put buyers stand to lose is the initial premium paid.

It's worth noting that today's bearish options bias is very unusual, based on recent trading history. Specifically, during the past 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open 3.27 Barrick Gold Corporation (USA) (NYSE:ABX) calls for every put. In other words, today's activity aside, options traders think the high-flying gold stock has fuel left in the tank.

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