"The huge open interest build for Jan 2006 is quite clear. There is an increase in the Put OI also but on inspection these puts have a strike price that is in or very close to the current stock price. This means that these can be exercised on any dip in price while the calls are spread across a wide range of strike prices and are clearly looking for a big move.
Let’s look specifically at Newmont, the world’s biggest gold miner. NEM is currently trading at $44 and has NEVER exceeded $60 per share. There are practically no call options for Dec 2005 above $60. However, in Jan 2006 a staggering 34,000 contracts out of a total of 147,000 are looking for a price of NEM to exceed $60. There are 8300 contracts for a strike price of $80! So no one thinks NEM can rise 36% to make a new all time high in December yet 23% of the Open Call Interest in January 2006 is speculating that NEM will make a rapid rise to a new all time high, and 6% of the investors believe it will reach $80 or more! There are no other open calls for $80 until Jan 2007. If someone was going to make such an aggressive speculation that Newmont could reach $80 they would normally want to have time on their side and buy options that expire way in the future. There are 11,300 call contracts for an $80 strike price open for Jan 2007; just 3000 contracts more than for Jan 2006. Whoever has bought Jan 2006 $80 call contracts is very sure that Newmont is rising to high levels and it will happen within the next 2 months.
A stock like Newmont is not a turbo-charged, rocket-fueled little junior miner that can rise 30% in a single day on good exploration news. Newmont rises slowly. To generate this type of movement in Newmont the gold price would have to make an extraordinary move such as approach $600/oz or more."
