Wednesday’s total option volume of 20.3 million contracts resulted in net open interest growth of 3.33 million calls and 3.74 million puts. Barrick Gold Corporation (ABX), Newmont Mining Corp Holding Co (NEM), Goldcorp Inc (GG) and Apple Inc (AAPL) saw the greatest growth. Top five new positions opened include 250k Barrick Gold Corporation (ABX) Jan-14 80 calls, 200k Newmont Mining Corp Holding Co (NEM) Jan-14 90 calls, 156k Goldcorp Inc (GG) Jan-14 80 calls, 41k Halliburton Co (HAL) Jan-14 40 puts and 40k Taiwan Semiconductor Manufacturing Co Ltd (TSM) Apr-13 20 calls.
Gold stocks were hammered yesterday following the release of the FOMC Minutes which suggested the Fed may slow its asset purchases sooner than anticipated. There was a $40+ drop in gold prices yesterday. Barrick Gold (ABX) was down $1.27 to $30.24 and a block of 250,000 Jan 80 calls were bought on the stock for 7 cents per contract, to open. Newmont Mining (NEM) dropped $2.32 to $40.58 and 200,000 Jan 90 calls are bought on the stock for 10 cents per contract. Goldcorp (GG) was down $1.36 to $32.31 and 156,000 Jan 80 calls are bought on the stock for 10 cents per contract. All three positions are deep out-of-the-money calls and bought possibly on the view the recent sell-off is overdone. NEM reports earnings today after market close. The activity will create the three largest blocks of open interest in the materials sector.
One way to play the accelerated merger and acquisition activity is to buy the private equity firms that arrange for and participate in such deals. Fortress Investment Group (FIG) is one of the major players in the space. Yesterday, there was an opening buyer of over 2,000 FIG Sep 5 calls which are deep in-the-money. This was nearly 7x normal volume.