Goldcorp Options Trader Sees Stock Doubling in Next Year

One options trader is counting on Goldcorp Inc. (GG) shares reaching a multi-year high

Feb 21, 2017 at 2:35 PM
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Goldcorp Inc. (USA) (NYSE:GG) is down 1.4% this afternoon at $17.13, but that hasn't kept one options trader from placing an extremely bullish bet. Minutes after the opening bell, Trade-Alert data suggests one speculator initiated two bull call spreads at the January 2018 25 and 35 strikes. The trades cost over $263,000 total, and offer a max payout if GG shares more than double to $35 by next January's expiration, reaching heights not seen in four years.

Largely thanks to these options trades, intraday call volume is at four times the expected amount. Speaking more broadly, total intraday options volume ranks in the 99th percentile of its annual range.

Today's call-bias is more of the same for GG options traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), speculators have bought to open nearly quadruple the number of calls as puts during the past two weeks. The resultant call/put volume ratio of 3.71 ranks in the bullishly skewed 80th annual percentile.

That said, things may not be as simple as they appear. Goldcorp short interest has ballooned in recent weeks, adding 18% in the most recent reporting period alone and reaching levels not explored since late 2006. So, it's possible short sellers are purchasing calls to hedge against upside risk. On a similarly bearish note, recent Commitment of Traders (CoT) data shows net long positions on gold among large speculators are not far from annual lows.

Whatever the case may be, it is -- without question -- an excellent time to purchase short-term options premium on GG. The stock's Schaeffer's Volatility Index (SVI) sits at an annual low of 33%, hinting at muted volatility expectations -- and relatively cheap options prices. Plus, the equity's high Schaeffer's Volatility Scorecard (SVS) of 80 suggests the shares have tended to make larger moves than the options market has priced in over the past year.

Technically speaking, Goldcorp Inc. (USA) (NYSE:GG) shares have been blistering up the charts since bottoming below $12 in mid-December. In fact, the gold stock is now flirting with the 61.8% Fibonacci retracement of its June-to-December selloff, which has alternated roles as both support and resistance:

goldcorp stock chart with fibonacci retracement levels

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