AUY – Yamana Gold, Inc. – Shares of the gold producer Yamana Gold, Inc., surged along with other gold mining firms today as gold futures jumped to an all-time high of $1272.00 per ounce. Yamana’s shares rallied as much as 5.3% to touch an intraday high of $10.65 as of 12:45 pm ET. One options player populating the January 2011 contract is positioning for the price of the underlying stock to appreciate significantly ahead of expiration. The investor enacted a bull call spread, buying 2,500 calls at the January 2011 $12.5 strike at a premium of $0.34 each, and selling the same number of calls at the higher January 2011 $15 strike for premium of $0.09 apiece. Net premium paid to establish the spread amounts to $0.25 per contract. The trader makes money if Yamana’s shares surge 19.7% over today’s high of $10.65 to trade above the effective breakeven price of $12.75 by expiration day. Maximum potential profits of $2.25 per contract are available to the gold-bull should shares of the gold producer rally 40.8% to exceed $15.00 by January expiration. The stock’s overall reading of options implied volatility is currently up 5% at 36.94% just before 12:50 pm ET.
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Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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