Options Traders React to Barrick Gold's Mali Setback
Wednesday, Jan 15, 2025 2:42 pm ET
6min read Barrick Gold's (NYSE:GOLD) recent troubles in Mali have sent shockwaves through the mining sector and caught the attention of options traders. The company's share price has taken a hit, and options trading activity has surged, with a significant increase in put options being bought. Let's delve into the details and explore the implications for investors.
The Malian government's seizure of approximately 3 metric tons of gold from Barrick Gold's Loulo-Gounkoto mining complex, valued at $245 million, has exacerbated an ongoing dispute between the company and the government. This action, coupled with the suspension of operations at the mine, has led to a 21.1% decline in Barrick Gold's share price over the past three months. The stock is currently trading at $17.48, down 0.74% on the day.
Options traders have been quick to react to the situation, with unusual activity in Barrick Gold's options contracts. On January 16, 2025, 56,000 calls and 50,000 puts were exchanged, four times the average intraday volume. The most active contracts were the January 14.5 call and 14.5 put, while new positions were opening at the weekly 1/31 16-strike call and put.
The security's 50-day put/call volume ratio of 0.57 sits in the 99th percentile of its annual range, indicating that traders have been picking up puts at an unusually high rate recently. This bearish sentiment is further supported by deep-pocketed investors, with 75% of notable options leaning bearish. Among these, 6 are puts, totaling $321,885, and 2 are calls, amounting to $199,000.
The Dec 20, 2024 $3 Call had some of the highest implied volatility of all equity options today, suggesting that investors in the underlying stocks are expecting a big move in one direction or the other. This high implied volatility could indicate that options traders are pricing in a significant event or development in Barrick Gold's situation in Mali.
In conclusion, the recent developments in Mali have sparked a flurry of options trading activity in Barrick Gold, with a significant increase in put options being bought. This bearish sentiment is reflected in the company's share price performance and the high implied volatility in its options contracts. Investors should closely monitor the situation and consider the potential risks and rewards before making any decisions regarding Barrick Gold's stock or options.
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