U.S. Markets closed

Why traders are selling calls in Harmony

David Russell (david.russell@optionmonster.com)

Some bulls are apparently throwing in the towel on Harmony Gold.

optionMONSTER's tracking systems detected the sale of roughly 10,500 November 5 calls on Friday, most of which priced for $0.30. Volume was more than 200 times the previous open interest at the strike, clearly indicating new activity.

The investor is now obligated to sell shares in the South African mining company for $5 through November no matter how far they might climb during that time. He or she could be trading the options against a long stock position as part of a covered call strategy or could simply be placing a bearish bet. (See our Education section)
HMY fell 9.62 percent to $4.32 on Friday and is down 56 percent in the last year. The shares are now back to their lowest price since early 2001.

The rout came after the company announced a third-quarter loss of $0.05 a share, while analysts had expected profit of $0.18. Management also said it would slash capital expenditures to counter a plunge in bullion prices.

Total option volume was 9 times greater than average in the session.

More From optionMONSTER