GO
Loading...

Option Bulls Step in as Goldcorp Gets Smacked

Goldcorp

Gold Bars
AP
Gold Bars

fell again Wednesday, but option traders are feeling bullish about the miner.

There was heavy activity yesterday in the July 44/July 50 call spread, which will leverage a rebound in the precious-metals company. Traders bought the July 44 calls for $2.24 and sold the July 50s for $0.67, translating into a cost of $1.57. More than 4,300 contracts traded in both.

Goldcorp

Owning callslocks in a $44 entry price and an exit price of $50, giving traders the right to collect the $6 difference. That amounts to a profit of about 280 percent, given the $1.57 cost to open the position, but the trade will make that money only if the stock rallies to $50 by expiration in three months.

Goldcorp shares tumbled 5.55 percent to close at $41.14 yesterday after hitting a 52-week intraday low of $40.55 as gold prices got hammered again yesterday. That follows losses on Tuesday after Citigroup downgraded the stock.

Almost 42,000 calls traded in the name versus 16,600 puts, reflecting the day’s which is bullish option trades. Total volume was also five times greater than its daily average.

—Najarian has no positions in GG.

Additional News: Gold Falls Hard: Era of Cheap Money Over?

Additional News: Will Investors Strike Profits With Goldcorp?: Jim Cramer

___________________________

___________________________
Options Trading School:

___________________________

Pete Najarianis a professional investor, CNBC contributor, regular co-host of CNBC’s “Fast Money ” and co-founder ofOptionMonster.com .

___________________________

Disclaimer