Shares of Kinross Gold Corp (KGC) have been knocked down over 20 percent in the past year, although shares have been starting to slightly trend up in the last week. One trader sees the possibility for a big move in shares.
That’s based on the September $8 calls. With 158 days left to trade, 51,342 contracts traded compared to an open interest of 791, for a 65-fold jump in volume on the option. The buyer of the calls paid $0.22 to make the trade.
The stock last went for just under $6, so shares would need to rise about $2, or 33 percent, for the options to move in-the-money. The stock also has a 52-week high of just over $8 per share.
In addition to declining over the past year, the company has been a poor performer even among peers. Revenue is down over 26 percent, and the company barely posted a profit in the most recent quarter.
Action to take: While gold can prove a safe haven, the returns in both gold and gold stocks can be lumpy. Today’s buyers can get a 2 percent dividend yield in shares, although with a high payout ratio, it’s unlikely that the dividend will be raised anytime soon.
For traders, the option is inexpensive enough that a total loss wouldn’t be a huge deal, but the option could still deliver triple-digit returns in the coming months before expiration on a surge higher in gold prices. That makes it an attractive buy, possibly even moreso than shares right now.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.