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« When is the Best Time to Buy Gold? | Main | A Strategy to Protect Your Portfolio »

Yamana Gold Incorporated A Future Options Play

AUY Chart 23 jun 09.JPG

Chart courtesy of Stockcharts

As we can see from the above chart Yamana Gold Incorporated (AUY) has been severely sold off recently which could be present us with a future options play as and when gold moves higher. Many of the stocks in this sector have experienced a similar fall and all in a short time too, just shows what a volatile market sector this is.

The rally in the broader markets appears to be coming to an end as this week kicked off with the DOW falling 200 points to close at 8339 on the back of the lower forecast for global economic recovery released by the World Bank. As the markets retreated so did commodities with the prices of oil dropping to around $67 and gold losing around $11.00 to trade at $922/oz. The beneficiary here is the US Dollar which moved up 0.57% to close at 80.77. The dollar is trying to rally and has managed to move up about 2% this month and could get stronger if the main stream market continues to correct.

Yamana has recently been added to the The FTSE Gold Mines Index which reflects the progress that the company has made and will also give it a tad extra in terms of exposure to investment funds who would not normally venture outside of this index when considering the precious metals sector.

What we need to do now is watch for signals that this current shakeout in gold is over and then identify those quality stocks that have been even more oversold than the others in the pack and either acquire the stock or look for an options play on that particular stock. Similarly as we identified Randgold as an overbought stock and sold our holdings and then bought the PUT options in an attempt to profit from the sell off of Randgolds stock. This options play is up 66% since we purchased the PUTS recently.

So in conclusion don't fall asleep the investment environment is changing fast and the window of opportunity will only show itself for a short time. If you are long at the moment then hold tight as we still expect gold to rally to record levels before the year is out and are working to position ourselves with that in mind.

Yamana Gold Incorporated trades on the following Stock Exchanges:

AUY on the New York Stock Exchange
YRI on Toronto Stock Exchange
YAU on the London Stock Exchange, giving it global exposure to investors.

Yamana Gold has a market capitalization of $6.19 billion, a P/E ratio of 13.13, with 732.92 shares outstanding, has a 52 week high of $17.00 and 52 week low of $3.31 and closed today at $8.44.

Have a good one.

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Reader Comments (2)

Thanks Gold-Prices for the timely review. It is good to know that we are not out here all by ourselves to try to figure things out.

June 23, 2009 | Unregistered CommenterJohn Ell

"52 week high of $17.00 and 52 week low of $3.31 and closed today at $8.44"

I didn't check and I assume this is AUY in US$ and not YRI.

Do we really care about P/E ratio for commodities? I know we don't for oil and we check cash flow but I don't know about gold.

Will watch for your alert on Yamana. Hopefully it is as perfect as your timing on GOLD puts.

June 23, 2009 | Unregistered CommenterEP

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