Bears Are Digging for Downside in This Space


Bears are digging for downside in gold miners, one of the worst-performing major industry groups this year.

More than 23,000 December 11 puts were bought yesterday in Barrick Gold (ABX). The first blocks changed hands for $0.10 but premiums rose to $0.12 as the bids flowed in.

Puts fix the level where a security can be sold, so they appreciate when shares decline. (See our Knowledge Center.) Their low upfront cost helps investors manage risk and can also result in significant leverage if prices move in the correct direction.

ABX fell 2.48 percent to $12.59 yesterday and has lost 13 percent of its value in 2018. The entire sector has taken a beating as the Federal Reserve raises interest rates and the U.S. dollar pushes higher. Both of those catalysts tend to weigh on commodities like gold and silver.

The timing of Monday’s puts is also noteworthy because they expire on December 21, shortly after the Fed’s widely expected to hike its target rate. They also cover other economic events like consumer prices tomorrow morning and non-farm payrolls on December 3.

Puts outnumbered calls in ABX by more than 2 to 1 yesterday.

Barrick Gold (ABX) chart with 50- and 200-day moving averages.
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David Russell is VP of Market Intelligence at TradeStation Group. Drawing on two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them apprised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.