KGC closed at $19.00 up 1.6% yesterday. <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TKNARAhjUeI/AAAAAAAAFBY/m-Xa4bWM6Ns/s1600/kgc_summary.gif"> An interesting trade build up in a gold stock... First, let's quickly look at the GLD three month stock chart (<a href="http://livevol.blogspot.com/2010/09/kgc.html">in the article</a>). <img src="http://4.bp.blogspot.com/_hMry1m7UF10/TKNBWaJBJ5I/AAAAAAAAFBg/ssOpRfOAuqg/s1600/gld_chart.gif"> Basically straight up. KGC traded over 37,7000 options yesterday on total daily average option volume of just 12,480. The largest trade was 10,400 Nov 17/20 risk reversals, bought puts/sold calls (I think). The Stats Tab and Day's biggest trades snapshots are included (<a href="http://livevol.blogspot.com/2010/09/kgc.html">in the article</a>). The Options Tab (<a href="http://livevol.blogspot.com/2010/09/kgc.html">in the article</a>) illustrates that the calls are mostly opening (compare OI to trade size), the puts are ambiguous. Looking at the new OI pre-open, I see the put OI has jumped to nearly 20,000, so the puts were opening as well. The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/09/kgc.html">in the article</a>) illustrates the vols by strike by month. We can see the front three months do have a turn up to the upside, though for a commodity this is actually normal. Finally, the Charts Tab (6 months) is below (<a href="http://livevol.blogspot.com/2010/09/kgc.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30⢠- red vs HV20⢠- blue vs HV180⢠- pink). The yellow shaded area at the very bottom is the IV30⢠vs. the HV20⢠vol difference. What's noticeable is that the stock (gold) is ripping. All-time highs are occurring in the commodity almost daily at this point. I find the order flow to be interesting in that it's bearish, long a touch of vol (21 vol purchase in the puts to 17 vol sale in the calls) and a double down. In general the market sentiment feels more bullish and bets on gold no longer being the best investment echo that. This is trade analysis, not a recommendation. Details, trades, prices, vols, skews, charts: http://livevol.blogspot.com/2010/09/kgc.html Legal Stuff: <a href="http://www.livevolpro.com/help/disclaimer_legal.html">http://www.livevolpro.com/help/disclaimer_legal.html</a>
KGC has long been something of a heart breaker. It hit its peak at $27 back in March 2008, when gold first hit $1000. Lately any time KGC reaches about $20 it gets whacked down into the $16 - $17 range a little later, regardless of the gold price. So I guess somebody is betting that history will repeat, although this isn't a bet I'd make myself. Despite their alleged leverage over the gold price a lot of gold stocks have done less well than the metal itself.