Gold Fields Limited (GFI) Options Pop as Stock Slides on Fed Rate Hike

Gold Fields Limited (ADR) (GFI) options are flying off the shelves, as the gold stock loses its luster

Kirra Fedyszyn
Dec 15, 2016 at 3:34 PM
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Yesterday's decision by the Federal Open Market Committee (FOMC) to raise interest rates in the U.S. has been weighing heavily on gold prices. In fact, February-dated gold futures finished today down 2.9% at $1,129.80 an ounce -- the commodity's lowest close since February. Meanwhile, Gold Fields Limited (ADR) (NYSE:GFI) is among the stocks taking a hit as gold slides, off 6.7% at $2.65 -- not far from an annual low. The equity's options are flying off the shelves today, and not everyone is betting on a rebound.

Jumping right in, GFI puts are changing hands at close to triple the expected intraday rate, though calls still lead on an absolute basis by a 3-to-1 margin. What's more, total options volume is set to end the day in the 98th percentile of its annual range, with put and total open interest already docked at 12-months highs. Most active this afternoon is the April 2017 3-strike call, where it looks like speculators have been selling to open new positions. If this is indeed the case, the call writers are betting on the $3 level to serve as a ceiling for GFI over the coming four months.

As it happens, the $3 mark has long been in focus for options traders. Specifically, the soon-to-be front-month January 2017 3-strike call is home to peak open interest across all GFI options. It also saw the largest increase in open interest over the past two weeks, with 3,145 contracts added. However, unlike today's activity, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) confirms a majority of positions at this strike have been bought to open, signaling more hopeful expectations.

Taking a step back, an absolute preference for calls is nothing new among GFI options traders. However, these speculators have been far more put-heavy than usual of late. In fact, the stock's 10-day put/call volume ratio of 0.38 at the ISE, CBOE, and PHLX sits higher than 89% of all readings from the past 12 months.

There are plenty of bears elsewhere, as well. While short interest represents less than 1% of GFI's total float, these pessimistic positions spiked by more than 45% in the most recent two-week reporting period. Plus, not one analyst currently recommends buying the shares.

Technically, the shares have been falling hard since their August high at $6.60. Under pressure from the 20-day moving average, Gold Fields Limited (ADR) (NYSE:GFI) has shed 60% relative to that peak, and is now in the red on a year-over-year basis.

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