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Options Action

Is the gold trade back on? The options market is betting on it

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Mining for profits with call options on Newmont Corp.

Bullish options traders are diving back into the gold space after the metal closed its worst month since 2016 in November. One of the most popular ways to trade gold continues to be through mining stocks, and one name in particular stood out in Monday's trading session.

"We were taking a look at Newmont Corporation," Optimize Advisors CIO Michael Khouw said Monday on CNBC's "Fast Money." "This one saw calls outpacing puts by [a ratio of] about 2.5-to-1, and the most active options were the January 65-calls. About 2,800 of those were trading for about $1.50 [per contract]."

Buyers of those calls are expecting a return of at least 8% in the stock by January expiration, which isn't a totally unreasonable bet. Even after November's pullback, the stock is up 42% in 2020, far outpacing the 24% year-to-date gains of the GDX gold miner ETF that tracks the space.

Newmont wasn't the only name among the miners to see heavy options activity, either.

"The gold miner ETF also saw unusual activity, GLD — the gold ETF — and also in the futures market," said Khouw. "The January 1900-calls saw a lot of activity today, as well."

Newmont Corporation was trading slightly higher in Tuesday's session.

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