Filed under: Bad news, Industry, Newmont Mining (NEM), Options, Technical Analysis, Commodities

Newmont Mining Corp. (NYSE: NEM) stock is dropping today as gold futures are falling hard (more than 2%) in this morning’s market. Gold is falling as the dollar regains some of the ground it has lost recently. If you think this stock won’t be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on NEM.

The stock leapt last month from trading near its year low to a 52-week high of $48.42 on September 24, but quickly retreated to the mid-$40’s. This morning, NEM opened at $45.45. So far today the stock has hit a low of $44.70 and a high of $45.48. As of 10:35, NEM is trading at $44.75, down $1.25 (-2.7%). The chart for NEM looks bullish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.

For a bearish hedged play on this stock, I would consider a November bear-call credit spread above the $50 range. A bear-call credit spread is an options position that combines the purchase and sale of call options to hedge risk in case the stock doesn’t do what you think but still leverage nice returns. For this particular trade, we will make a 13.6% return in 7 weeks as long as NEM is below $50 at November expiration. Newmont would have to rise by more than 11% before we would start to lose money.

Continue reading Newmont Mining (NEM) lower as gold retreats on stronger dollar

Permalink | Email this | Comments

Share This

This entry was posted on Tuesday, October 2nd, 2007 at 2:58 pm and is filed under Stocks Money News. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.