Silver producer Pan American Silver (PAAS) is up 51% over the past year, more than double the return of the S&P 500. One trader is betting that shares will continue higher over the coming weeks.
That’s based on the August $30 calls. With 31 days until expiration, 12,601 contracts traded compared to a prior open interest of 100, for a 126-fold rise in volume on the trade. The buyer of the calls paid $0.13 to make the bullish bet.
Shares recently traded for just under $24, right at their 52-week high.
For the option to move in-the-money, shares would need to rise another $6, or 25%. Such a move is a bit aggressive, but not impossible, in the span of a few weeks.
Commodity prices have held up well amid stubborn inflation, and appear to be in a longer-term uptrend.
Action to take: Unlike most gold stocks, shares haven’t flipped to profitability yet. But revenues are up 54% over the past year, and shares should continue to trend higher with commodity prices.
At current prices, Pan American Silver also pays a 1.7% dividend.
For traders, the August $30 calls are fairly aggressive. They could see high double-digit returns, if there’s a strong rally in the coming weeks.
Less aggressive traders may like the October $30 calls. They cost $0.55 at current prices, but have far more time for a big rally to play out.
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 company mentioned in this article.