Barrick Gold Corporation, Freeport-McMoRan Inc Call Options Pop on Payrolls

A lackluster jobs report has proven to be a boon for Barrick Gold Corporation (USA) (NYSE:ABX) and Freeport-McMoRan Inc (NYSE:FCX)

Alex Eppstein
Sep 2, 2016 at 11:08 AM
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Gold stocks are breaking out, as a disappointing jobs report weighs on rate-hike expectations. Among the winners today are Barrick Gold Corporation (USA) (NYSE:ABX) and Freeport-McMoRan Inc (NYSE:FCX), both of which are seeing increased call demand in their options pits.

ABX was last seen 0.8% higher at $17.94 -- paring earlier gains -- and has increased almost 143% on a year-to-date basis. As such, call options are crossing at 1.4 times the usual intraday rate. Most active is the weekly 9/2 18-strike call, where traders may be selling to close their bullish positions -- potentially locking in gains ahead of expiration tonight. Meanwhile, slightly longer-term speculators may be purchasing fresh positions at the weekly 9/9 19-strike call, anticipating the gold stock will topple $19 by next Friday's close.

This preference for bullish bets represents a break from the prevailing trend. During the last two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), ABX has racked up a put/call volume ratio of 0.91 -- in the bearishly skewed 81st annual percentile. Likewise, 11 of 14 analysts still consider the outperforming shares a "hold" or worse. From a contrarian perspective, Barrick Gold Corporation is in a prime position to benefit from unwinding negativity on Wall Street.

Turning to FCX, the shares are up 1.6% at $10.52, and have roughly tripled in value relative to their January lows just above $3.50 -- even after a late-July earnings setback. Meanwhile, the stock's call options are running at 1.5 times the expected intraday pace, with at least some buy-to-open activity spotted at the weekly 9/9 11 strike. In short, buyers of these out-of-the-money positions foresee a rally above $11 by next Friday's close, when the weekly series expires.

Bullish betting is nothing new for FCX. During the last two weeks at the ISE, CBOE, and PHLX, traders have bought to open 1.75 calls for every put, and the resulting call/put volume ratio outranks 71% of all other readings from the prior year. What's more, Freeport-McMoRan Inc's Schaeffer's put/call open interest ratio (SOIR) of 0.87 registers in the 9th annual percentile, hinting at a pronounced call-skew among options in the front three-months' series.

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