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Options trader makes big bet on gold into 2020

VIDEO2:0702:07
Options traders digging for big gains in this gold miner

Gold is about to end the decade on a high note, and will close out this year with its best performance since 2010. Bullion has bounced 19% this year, even as stocks have soared to all-time highs.

This has been great news for the gold miners, and the GDX ETF that tracks the space, which has gained 40% this year. Against the broader market, that represents significant outperformance, and one trader in the options market is betting on even bigger gains to come for one name in the group.

"We saw two times the average daily call volume in Newmont Goldcorp today, and the trade that I was taking a look at was somebody betting ... that the stock is breaking out here." Optimize Advisors President Michael Khouw said Monday on "Fast Money."

Newmont is up 26% in 2019, which isn't too shabby, but it is still underperforming its peer group by about 14 percentage points. However, if gold keeps shining brighter, this trader is betting that Newmont could start to catch up.

"They were buying the January 45.5 calls. Seven hundred and fifteen of those traded for about 21 cents, and the buyer of those calls is obviously betting that the stock is going to finish above that strike price by January expiration, which is two weeks from this coming Friday," said Khouw, "And that would represent a 5% increase from where the stock finished the day today."

Betting on a 5% rally from here over the next two weeks might not be unreasonable, either. Newmont has surged about 14% in the last month, making it one of the groups best performers in that time period. If the stock can extend that pace for two more weeks, this bet would pay off.

Newmont was trading slightly lower Tuesday morning.

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