Wednesday, September 1, 2010

Allied NV Gold (ANV) - Gold Futures Options Are the Story

ANV closed $23.45, up 3.6% yesterday with vol ripping in all months. The LIVEVOL™ Pro Summary is below.

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 (click either image to enlarge).

The Options Tab (click to enlarge) 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 (click to enlarge) 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 (click to enlarge). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue). The yellow shaded area at the very bottom is the IV30™ vs. the HV20™ vol difference.

Note how the stock has ripped from $15 (ish) to now over $24. The IV30™ has seen a spike from yesterday's action leaving a 55 to 43 IV30™ to HV20™ 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 $21.85 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.

Legal Stuff:


  1. Nice post and analysis. Just thought I'd be a bit of a pain and comment on your P/L. It's actually protected to the downside till $21.85. $(25-3.15).

    Excellent post as always.

  2. I think most people are using gold as a bet against fiat currency, more so than inflation hedge at this point?

  3. Agreed. Either way, not exactly a vote of confidence for the US.