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Trade sees little hope for Agnico Eagle

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Traders see little luster in gold producer Agnico Eagle Mines.

The Canadian company is already down more than 50 percent this year as persistently weak bullion prices cause investors to liquidate positions in miners. Today's option action maintains the dismal outlook: More than 5,000 January 2015 50 calls were sold, mostly for $1.04. Previous open interest was just 3,606 contracts, indicating that new short positions were initiated.

The investor is now obligated to sell AEM shares for $50 if they close above that level on expiration more than a year from now. Below it, he or she will keep the credit as the options will expire worthless. (See our Education section for other market-neutral strategies that make money from a stock not moving rather than moving.)

AEM is down 3.48 percent to $25.53 in morning trading. It spent July consolidating between $25 and $30 but was unable to get above its declining 50-day moving average. That could make some chart watchers expect momentum to remain bearish.

Total option volume is quadruple the daily average so far today.

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