economy
Here's an options trade to profit off a likely rebound in this gold mining stock
This trade provides an opportunity to make money if the gold miner rebounds off its trend line back toward prior highs, Michael Khouw writes.
TL;DR
- Newmont's stock price decline offers an opportunity for options investors with elevated premiums.
- A bullish risk reversal trade is suggested: sell July $90 put, buy July $110 call, sell July $130 call for a net cost of ~$2.15.
- This strategy profits if the stock moves towards $130, with a risk of buying shares at $90 if the stock falls.
- Newmont's value is supported by its 'Tier-1' mines and the ongoing integration of Newcrest.
- Mean reversion to its historical 15x cash flow multiple could lead to a 30% stock increase.
- Potential risks include persistent inflation increasing labor and diesel costs, affecting all-in sustaining costs.