Wednesday, September 29, 2010

Kinross Gold (KGC) - Bearish on Gold Might Point to Bullish on Market

KGC closed at $19.00 up 1.6% yesterday. The LIVEVOL™ Pro Summary is below.

An interesting trade build up in a gold stock... First, let's quickly look at the GLD three month stock chart (click to enlarge).

Basically straight up.

KGC traded over 37,700 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 (click either image to enlarge).

The Options Tab (click to enlarge) 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 (click to enlarge) 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 (click to enlarge). 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.

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