Shares of gold mining operation AngloGold Ashanti (AU) are down 32 percent in the past year, amid a drop in gold-related stocks overall. One trader sees the potential for a surge higher at some point in the next six months.
That’s based on the April 2023 $18 calls. With 175 days until expiration, 2,050 contracts traded compared to a prior open interest of 128, for a 16-fold rise in volume on the trade. The buyer of the calls paid $0.68.
Shares recently traded around $13.50, so they’d need to rise about $4.50, or about 33 percent, for the option to move in-the-money. That would still be well under the stock’s 52-week high of $27.
Gold prices have languished in the past year as interest rates have risen to combat inflation. Gold tends to perform better when inflation is higher than expected.
The miner recently completed its merger, and shares of the newly combined giant trade for just 8 times earnings.
Action to take: If central banks start to pivot away from interest rate hikes while inflation is still running hot, gold prices could take off. Add in AU’s 3.3 percent dividend here, and it’s a reasonable stock to consider for an investor’s portfolio in the coming months.
For traders, the option has some time to play out, so look to buy on a down day for shares and sell on an up day for a faster turnaround. The gold space can sometimes have big, quick moves, but has been more subdued lately.
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.