What's behind call action in Royal Gold

optionMONSTER

Royal Gold is seeing an unusual call spread as the mining company's shares tumble with the price of the precious metal.

optionMONSTER systems show that a trader bought 2,801 October 65 calls for $2.59 in volume below the previous open interest of 2,807 this morning. At the same time, he or she sold 2,801 October 60 calls for the bid price of $3.70 against open interest of just 11 contracts at that strike, indicating a new position.

This could be credit spread that takes in $1.11, which would be the profit with RGLD below $60 at expiration. Alternatively it could also be a roll down, with the trader buying back short calls at the higher strike and opening a position lower as the stock drops. (See our Education section)

The RGLD is down 8.68 percent to $55.22, its lowest level in almost two years. It was at a high just above $100 at the start of October.

More than 17,000 RGLD options have traded already this morning, compared to a daily average of 2,100 in the last month. 

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