With Donald Trump back in the White House, the market has generally responded positively due to the implications of a pro-business framework. For gold producers and developers like Iamgold (IAG), the fundamental benefit could lie in economic cynicism. Since President Trump will be eager to push his mandate, the end result will likely be inflationary — and that should be a nice tailwind for IAG stock.
Fundamentally, perhaps the biggest catalyst for gold prices is the set of tariffs that Trump previously proposed. Throughout the campaign trail, Trump has threatened economic penalties against key players. Some nations like China represent obvious targets. However, his threats against Canada have led to serious concerns about unnecessary friction and likely retaliation.
What’s more, should the tariffs actually be imposed, they can easily lead to higher import costs, thus exacerbating inflation. Under such circumstances, investors may turn to gold as a reliable hedge against rising prices. For its part, IAG stock gained just over 17% since the start of the year and this is by no means an isolated performance.
Another element that could bolster gold prices (and by logical deduction IAG shares) is geopolitical uncertainty. During Trump’s first term, the president’s assertive foreign policy sparked global market tensions, positioning gold as an attractive safe-haven asset. A similar dynamic could play out again this time around, especially given the current hot conflicts.
Finally, Trump has recently pledged lower interest rates, even going so far as to demanding that they decline. Of course, a magic lever isn’t exactly available to him. Nevertheless, the point is that Trump is adamant about reducing borrowing costs. That will almost surely have consequences in the form of higher gold prices, thus making IAG stock incredibly tempting.
IAG Stock Triggers an Unusual Options Alert
Armed with such robust fundamentals, it was no surprise that IAG stock represented one of the top highlights in Barchart’s screener for unusual stock options volume. Specifically, total volume reached 3,710 contracts against an open interest reading of 42,890 contracts. Against the trailing one-month average metric, last Friday’s volume soared above 187.15%.
Another unsurprising element was the breakdown between calls and puts. Regarding the former category, volume jumped to 3,423 contracts versus only 287 contracts on the put column. This pairing led to a put/call volume ratio of 0.08, on paper significantly favoring the bulls.
A close look at options flow — which focuses exclusively on big block transactions likely placed by institutional investors — reveals that the aforementioned ratio can be somewhat interpreted at face value. Net trade sentiment stood at $26,000, giving the edge to the optimists. However, the advantage wasn’t overwhelming, suggesting that many of the calls were sold short.
Nevertheless, risk-tolerant speculators may be incentivized to consider the long side of the trade. Beyond the supportive fundamentals, IAG stock may benefit from its upward bias. Over the past five years, stochastic pricing data — or market trends based on no other context aside from the temporal — shows that a position entered at the beginning of the week will be positive by the end of it 51.75% of the time.
Interestingly, on a four-week basis, investors enjoy a bullish success ratio of 52.71%; that is, the chances that a position initiated at the beginning of the month will be profitable at the end is just under 53%. Even better, certain dynamic conditions tend to trigger enhanced optimism in IAG stock.
Last week, IAG posted a return of 6.34%. Whenever the security rises between 5% to 10% in a one-week period, there’s a 53.66% chance that by the fourth subsequent week, the stock will enjoy a positive return. What’s more, in the third week following the anchor event, the success ratio rises to 60%.
Again, if you believe in gold, IAG should be on your radar.
Leveraging the Power of the Debit Call Spread
Because IAG stock is priced at just over $6, investors may benefit from the law of small numbers. However, if you want even greater kick, the bull call spread could be an ideal weapon.
Also known as a debit call spread, this multi-leg options strategy involves buying a call option and simultaneously selling a call at a higher strike price (for the same options chain). The idea is for the target security to rise to or above the short strike price. If this materializes, the trader can collect the maximum payout.
To be clear, the upside is capped by the short call option, making bull call spreads limited-risk, limited-reward opportunities. However, one of the top benefits is a lower threshold to profitability in addition to potentially robust payouts.
Based on statistical trends, speculators may want to consider the 5/7 bull call spread for the options chain expiring Feb. 21. At time of writing, this transaction puts $110 at risk for the chance to earn $90, or a payout of 81.82%.
