Silver Unusual Option Activity Report

This morning I posted on the significant option activity surrounding gold and silver. In that post, I gave a little history lesson that gold doesn’t always perform well during times when the Fed is expanding policy. The example I gave was from 2012 to 2014. Today, it’s a different environment and one that is setting up well for precious metals. It looks like the option market is starting to take notice as today the interest is expanding.

Silver Option Activity

There were two rather large trades made today on a couple of silver mining stocks. The activity coincided with some rather significant movement in these stocks, with many breaking out. Here’s a breakdown of the activity on these stocks:

• First Majestic Silver Corp (NYSE: AG)
  • 8,000 29 JAN 21 $12.50 calls BOT @ $0.72 in one print

• Coeur Mining Inc (NYSE: CDE)
  • 6,400 15 JAN 21 $9 calls mostly BOT @ $1.15 to $1.35

There is a bit of a difference between the type of option activity of on these two stocks. First Majestic saw most of the activity occur in one large block. For Coeur Mining, the activity was mostly spread out over a 25-minute period of time. The notional value of the trade on AG makes it more significant, but the coincidence of activity over the past two days ties it all together. As I’ve said many times, it’s good to see a theme.

Silver Technicals

Let’s take a look at the charts of these two silver stocks.

First Majestic Silver Corp

First Majestic has been range-bound for several months. Over the course of the past 6 weeks, the stock has seen its range tighten. Drawing lines across the highs and lows since November 6 shows a tringle formation. Today, the price broke out of the symmetrical triangle formation on substantial volume.

The width of the pattern at its widest point is around $2.70. If you take that measurement and add the value to the breakout level at $11.30, you arrive at a $14 price target in the coming weeks. That’s an indication of a retest of the $14 resistance from July.

(Click on image to enlarge)

Coeur Mining Inc

In the case of CDE, the price has been formatting a horizontal channel for the past many months. That type of horizontal formation is called a rectangle pattern. The price was able to break out of the pattern today on significant volume. Taking the $2 range of the pattern and adding it to the resistance level at $9, you get a target of $11.

(Click on image to enlarge)

Conclusion

The breakout from these formations provides a near-term target. However, the conditions helping these stocks may last a while and allow the prices of these stocks to trade at significantly higher levels. The coincidence of unusual option activity, technical breakouts, a possible stimulus deal, and a ready Fed is a potentially explosive combination for precious metals.