While the financial publication industry exploded with content regarding the potential popping of the gold and silver bubble, you’ll notice that early in the week, I issued a bearish story on gold mining juggernaut Newmont (NEM). I’m not here to say that I have some special insight into how securities behave because that would be absurd. However, I mention NEM stock because it gave two clear signals that something wasn’t right.
First, the volatility skew — which identifies implied volatility (IV) or a stock’s potential kinetic output across the strike prices of the same expiration date — of various options chains demonstrated the hedged nature of the gold miner. Essentially, traders wanted upside optionality but preferred the exposure synthetically instead of via actual ownership of NEM stock.
