Kinross Call Trades Jump to Record Amid Bets on September Rally for Stock

Trading of bullish options on Kinross Gold Corp., the Canadian miner that said yesterday it would buy Red Back Mining Inc. for $7.1 billion, surged to a record amid bets on a rally by September.

Almost 50,000 calls to buy the U.S.-traded shares changed hands, 16 times the four-week average and 2.5 times the number of puts to sell, as Kinross slumped 5.7 percent to $15.42 at 12:55 p.m. in New York. The most-active contracts were September $16 calls, which accounted for almost half of total volume.

Kinross, Canada’s third-largest gold producer, is scheduled to report second-quarter results tomorrow after the close of U.S. and Canadian exchanges. The Toronto-based company said yesterday that it agreed to buy the shares of Red Back Mining that it doesn’t already own to add mines in West Africa.

“Some players seem to view the weakness as an opportunity for bullish trades ahead of the miner’s earnings tomorrow,” Frederic Ruffy, senior options strategist at WhatsTrading.com, a New York-based provider of options-market analysis, wrote in a report today.

The September $16 calls changed hands 33,631 times and fell 47 percent to 62 cents as the underlying stock retreated. Before today, those contracts had an existing open interest of 814. Fifty-five percent of the trades were on the ask price, which indicates that buyers initiated most of the transactions.

Kinross is down 16 percent in U.S. trading this year, compared with a 5 percent gain for the Market Vectors Gold Miners exchange-traded fund, which tracks 31 producers.

Gold futures headed for the longest rally in almost four months on speculation that a weaker dollar and expanding markets in China will boost demand for the precious metal. Futures for December delivery gained 0.5 percent to $1,191.70 at 11:41 a.m. on the Comex in New York.

To contact the reporter on this story: Jeff Kearns in New York at jkearns3@bloomberg.net.