Put Buying Pops as Goldcorp Inc. (GG) Slumps

Goldcorp Inc. (USA) (GG) has been following the price of gold lower

by Kirra Fedyszyn

Published on Aug 30, 2016 at 3:28 PM
Updated on Jun 24, 2020 at 10:16 AM

Gold prices have been slipping in recent sessions, as relatively hawkish comments from Federal Reserve officials have bettors anticipating an interest rate hike sooner rather than later. Plus, traders are on edge ahead of this Friday's nonfarm payrolls report, which could be a big piece of the puzzle for Fed policymakers. Among the gold stocks feeling pressure on the charts is Goldcorp Inc. (USA) (NYSE:GG). The shares are down 5.5% at $15.42 today, and a rare crop of bears has popped up in the options pits.

Jumping right in, GG puts are trading at twice their typical intraday rate, with roughly 13,000 contracts on the tape. In fact, put volume is on pace to finish the day in the 95th percentile of its annual range, and puts account for each of the five most active strikes. Among the most popular today are the September and weekly 9/9 15.50-strike puts, as well as the October 15 put, which all appear to be seeing buy-to-open activity. Buyers of these puts are betting GG will continue its slide below the strike prices by each option's respective expiration.

As alluded to, today's preference for puts is a notable change of pace for the stock. Over the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than five GG calls have been purchased for each put. The resulting 10-day call/put volume ratio of 5.31 outstrips nearly three-quarters of all readings taken in the past year.

Whether on the put or call side, it's still an attractive time to pick up GG's short-term options. Premium is pricing in historically low volatility expectations at the moment, per the stock's Schaeffer's Volatility Index (SVI) of 41% -- in the low 15th percentile of its 12-month range. Plus, GG's 30-day at-the-money implied volatility is seated just 8 percentage points from an annual low, at 43.1%.

Outside of the options pits, bears have been backing off of late. Specifically, short interest on GG dropped by more than 22% during the two most recent reporting periods. These pessimistic bets now account for less than 2% of the stock's available float. Analysts' expectations have been more mixed, however -- half of the brokerage firms tracking GG recommend buying the shares, while the rest recommend holding or selling them.

Technically, Goldcorp Inc. (USA) (NYSE:GG) has been a strong performer in 2016, despite a slump over the past few weeks -- sitting on a healthy 33% year-to-date lead. Plus, with its 14-day Relative Strength Index (RSI) dropping to 27 this afternoon -- and into oversold territory -- the stock could soon get some relief.

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