Barrick Gold Corporation, Newmont Mining Corp Puts Hot as Dollar Strengthens

Barrick Gold Corporation (USA) (NYSE:ABX) and Newmont Mining Corp (NYSE:NEM) are struggling, as the U.S. Dollar Index (DXY) lingers in 13-year-high territory

Nov 18, 2016 at 2:39 PM
facebook twitter linkedin


Gold prices are suffering, as the dollar-denominated currency feels heat from a soaring greenback. Specifically, December-dated gold futures are down 0.7% at $1,208 an ounce, as the U.S. Dollar Index (DXY) lingers in 13-year-high territory. Two gold stocks succumbing to the pressure are Barrick Gold Corporation (USA) (NYSE:ABX) and Newmont Mining Corp (NYSE:NEM), last seen off 1.1% and 0.7%, respectively. And although both ABX and NEM are finding support near key technical levels, options traders are eyeing even bigger losses in the near term.

In ABX's options pits, for instance, put volume has swelled to two times what's typically seen at this point in the day -- with 36,518 puts on the tape, compared to 18,573 calls. Most active is the stock's December 14 put, due to one trader who may have bought to open a 13,844-contract block for $595,292 (number of contracts * $0.43 premium paid * 100 shares per contract). This is also the maximum risk on the trade, should the puts expire out of the money at the close on Friday, Dec. 16. Profit, meanwhile, will accumulate on a move south of $14.

Looking at the charts, ABX stock hasn't closed south of $14 on a daily basis since early April, and was last seen at $15.19. And while the shares have struggled amid the rising U.S. dollar, Barrick Gold Corporation (USA) has most recently found a foothold in the $15 region. Not only does this coincide with a 50% Fibonacci retracement of the gold stock's November 2015 low and July high, but it also represents a 100% year-to-date return.

NEM, meanwhile, is seeing puts cross at three times the average intraday pace, with 24,000 contracts traded. As a point of comparison, fewer than 7,900 calls are on the tape. Nearly 70% of the day's put volume has occurred at NEM's December 31 strike, where it seems safe to assume new positions are being purchased. In other words, put buyers expect the security to breach $31 by the close on Friday, Dec. 16 -- when the back-month options expire.

Technically, NEM stock breached the $31 in intraday action earlier this week, but ultimately bounced from this level, which marks a 50% Fibonacci retracement of its late-January low and mid-August high. What's more, today's decline is finding a foothold near $32, which is double NEM's Jan. 21 annual low at $16.05. Longer term, shares of Newmont Mining Corp are up almost 81% year-to-date.

Schaeffer's Weekly Volatility Trader subscribers just made 121.5% GAINS on a Barrick Gold (ABX) straddle! Sign up now for a discounted 30-day trial.

A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners