Can Newmont Mining catch up with gold's rally?
Can Newmont Mining catch up with gold's rally?
By:Tom Preston
The biggest gold mining company's call options point to upside ahead of earnings
With the price of gold hitting all-time highs, you might think Newmont (NEM)—the biggest gold mining company—would be hitting them too. But NEM is down on the year, even after bouncing 15% in the past three weeks after reaching its lowest price in five years.
If central bank demand for gold keeps increasing, that could keep its price up and by extension benefit NEM. And optimism for NEM’s next earnings report in late April could keep it from falling back too far.
NEM’s OTM calls are trading over equidistant out of the money (OTM) puts, indicating that the market sees risk to the upside. That might be enough for a trader to consider a bullish strategy in it.
NEM’s implied volatility (IV) has been steady because of earnings, and its 39% overall IV and 49% IV rank make its options good candidates for short premium strategies.
If you think NEM might continue to rally in the next few weeks and don’t want to take risk through earnings, the short 32.5 put in the April expiration with 28 days to expiration (DTE) is a bullish strategy that has a 93% probability of making 50% of its maximum potential profit before expiry, and that generates $1.49 of positive daily theta.
Tom Preston, tastylive chief market strategist, is responsible for the brokerage’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.
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