Shares of gold mining firm Newmont Mining (NEM) have been range-bound over the past few months. One trader sees the company moving back down to the lower end of its range in the next few weeks.
That’s based on the February $52.50 put. With 56 days until expiration, 6,930 contracts traded against a prior open interest of 295, for a 23-fold rise in volume. The buyer of the puts paid $0.88 to make the trade.
Overall, shares are down about 2 percent in the last year, as gold prices have likewise traded in a range, even as inflation, typically a big mover behind gold prices, has risen to its highest levels in 30 years.
And, following a big surge higher in gold prices in 2020, the moderation of gold prices has led to a drop in both earnings and revenue this year.
Action to take: Investors considering gold should probably wait for shares to drop to the lower $50 range. While the stock does pay a 3.75 percent dividend at today’s prices, gold prices will need to stay here or move higher to make this more than just an income play. Buying at the low end of the range and selling at the higher end can lead to a consistent way to trade shares.
For traders, the puts are a good bet that inflation rates will start to moderate in the coming weeks, and that most traditional stocks will likewise rally in the next few weeks. Traders should look for mid-to-high double-digit profits on this trade.
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.