What's behind call action in Royal Gold

Chris McKhann (chris.mckhann@optionmonster.com)

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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