Friday, March 22, 2013

Aqumin Volatility Newsletter 03/22/2013 - $EGO

EGO is looking at a bottom

As I sit around this Friday waiting for some news to come out of Europe to move my volatility positions, I can’t help but think how many people even know where Cyprus is? A country with less than 1 million people in the middle of Mediterranean Sea can move the US Treasury market. That is the state of our global economy. It is the latest in the saga of European Debt soap opera now entering its 4th season. So when the broader market picture gets murky I like looking at other names that have something going on in them. Here is an OptionVision™ snapshot of EGO.

Eldorado Gold Corp. looks a lot like most of the miners lately. Namely they are trading at 52 week lows. EGO makes some cash, but all of these names seem like they are in the way of an exodus of money from gold mining stocks. This might be due to the fact that the expected inflation from the Fed’s bond buying program has not materialized yet and gold has gone nowhere. The goldbugs are in hibernation for now. One thing that has materialized in EGO is a buyer of calls. And like I noticed last week the fact that customers are buying options is telling.

3-22-2013 3-19-31 PM

A customer is buying 10s of thousands of EGO Jul 10 calls. The fact they are buying these options in and of itself is important because capital is being spent on a sustained upswing. Like the index calls I saw last week the paper is thinking rally between here and the summer. I am seeing more and more of this kind of activity even into the weakness generated by the Cyprus issues. Paper is looking past the current problems into the golden future beyond. I have to agree with them. Just buying a July ATM call spread in here should work.

OptionVision™ – data from ORATS

Read more from Andrew at Option Pit

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