Gold mining operator Barrick Gold Corporation (GOLD) has seen shares slide by just over one-third in the past year. One trader is betting on a rebound in shares over the coming months.
That’s based on the September $21 calls. With 190 days until expiration, 9,668 contracts traded compared to a prior open interest of 375, for a 26-fold rise in volume on the trade. The buyer of the calls paid $0.30 to make the bullish bet.
Shares recently traded just under $16, so they’d need to rise over $5, or about 33 percent, for the option to move in-the-money. That would still be a bit under the stock’s 52-week high of $26.07.
Barrick is one of the largest companies in the mining space, and could see investor interest if inflation continues to run higher for longer. Gold mining companies tend to move in sympathy with short-term moves in the price of gold, even as many miners, including Barrick, hedge their production.
Action to take: After sliding in recent weeks, shares are fairly close to their November lows, and look poised to rebound in the coming months. Investors can also get a 3.4 percent dividend yield at today’s prices.
For traders, the September calls are inexpensive, but could deliver triple-digit gains on a massive rally in gold and gold mining stocks. It’s more likely that a rebound in shares in the coming months will deliver high double-digit returns.
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.