ANV - Gold Futures Options Are the Story

Discussion in 'Options' started by livevol_ophir, Sep 1, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    ANV closed $23.45, up 3.6% yesterday with vol ripping in all months.

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    An unconfirmed report said Bloomberg shows that the most widely held option on gold futures in New York is the $1500 strike, which is a bet of new all time highs (by 20%) by Dec. Allied Nevada Gold Corp. (Allied Nevada) is a gold producer, which operates the Hycroft Mine and has a large number of exploration claims in the State of Nevada.

    The company traded over 16,000 options on total daily average option volume of just 936. Calls traded on a 6:1 ratio to puts with 12,000+ Oct 25 calls trading. I believe they're purchases. The orders were relatively small; feels like it might even be "newsletter" driven volume, but I can't confirm that. The Stats Tab and Day's biggest trades snapshots are included (<a href="">in the article</a>).

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    The Options Tab (<a href="">in the article</a>) illustrates that the calls are opening (compare OI to trade size). The OI is 7,000 this morning, so there was a bit of two way trading. Note also that the largest OI other than that line is outside of Sep is in the hundreds (I believe 696 is the largest in the Oct 22.5 puts) so this is substantive size in this name.

    Note also the vol across the months jumped. Oct was up 9 points or 20%.

    The Skew Tab snap (<a href="">in the article</a>) illustrates the vols by strike by month.

    You can see the Oct 25 line skew has kinked upwards - makes pretty good sense. For those of you that look into broader economic plays, gold going up 20% isn't exactly good news though it does point to inflation rather than deflation.

    Finally, the Charts Tab (6 months) is below (<a href="">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30&#8482 - red vs HV20&#8482 - blue). The yellow shaded area at the very bottom is the IV30&#8482 vs. the HV20&#8482 vol difference.

    Note how the stock has ripped from $15 (ish) to now over $24. The IV30&#8482 has seen a spike from yesterday's action leaving a 55 to 43 IV30&#8482 to HV20&#8482 divergence. ANV is up 2.5% today at the time of this writing (9:41 EST).

    In terms of possible trades, the straddles seem pretty fat. An Oct 25 straddle sale @ $3.50 and purchasing an Oct 30 call for $0.35 leaves a $3.15 credit. Protected to the downside until $22.85 and a gain to the upside up to $28.15.

    If you like the delta bet, An Oct 25/30 call spread looks pretty nice if you can pay $1.05 or less. Doing it 1 x 1.5 gives you a smaller outlay but increases the margin a bit.

    This is trade analysis, not a recommendation.

    Details, trades, prices, vols, skews, charts here:

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  2. livevol_ophir

    livevol_ophir ET Sponsor

    Interesting that it's up again today, even with the market ripping.