Newmont (NEM) Might Be a UFO!

As a child, I yearned for the mines, but something always got in the way…but not today! It took a little while to fill, but I managed to mine a couple of contracts of NEM this morning. But before we get to that possible UFO…

What’s the Word on the Street?

Despite the possible firing of the Chairman of the Federal Reserve drama yesterday, the market is up on new data showing better-than-expected retails sales and fewer jobless claims. Taiwan Semiconductor helped by posting record quarterly profit, which boosted investor confidence about the massive amount of spending companies have been focusing on artificial intelligence.

Newmont (NEM)

What Is It?

Newmont Corp. engages in the exploration and acquisition of gold properties, containing copper, silver, lead, zinc or other metals. It operates through the following geographical segments: Canada, Mexico, Suriname, Argentina, Peru, Australia, Papua New Guinea, Ghana, and U.S. The company was founded by William Boyce Thompson on May 2, 1921 and is headquartered in Denver, CO. The listed name for NEM is Newmont Corporation.

Why Is It a Possible UFO?

Primarily its current share price relative to its fair value, what other option traders expect, and its volatility are the reasons NEM could be a UFO.

What About Recent News?

Gold has risen a lot this year because of global economic uncertainty. Newmont has benefited from that rise, but has taken a bit of a tumble recently because of its CFO resigning. It also sold stakes in 2 operations that allowed it to raise more cash for its core mining business.

What’s the Current Price?

NEM has gained an impressive ~50% this year, but has fallen ~2% in the past week and month. Despite that rapid rise, with the uncertainty caused by tariffs (that’s still not over), I can see gold’s attractiveness continuing to increase (at least in the short term), along with companies involved in the process of mining.

What’s the Fair Value?

I’d first like to emphasize that fair value is subjective. Many analysts at many banks and institutions rate stocks differently and assign fair value in their own unique way. So, what I like to do is take all the recent fair values since the most recent earnings report and average them. In this case…

Since NEM’s most recent earnings report on 04/23/2025, it has received 3 ratings and taking the average the fair value might be somewhere around: $68 (actually $68.25, but I’m rounding down). 2 ratings are a buy, 1 is a hold and the other from Morningstar is not listed. The lowest rating is $58, the highest is $74.

What Do Options Traders Think?

Calls are trading over equidistant puts, which means traders think there is a chance to the upside. You can see because… forget about the green columns and focus on the red. Notice how on the right side for the $55 put it says $1.73, it’s $1.94 for the equidistant call at $60.

The premium (the credit you receive for executing the trade) is currently less for selling puts, as opposed to selling calls. Basically because of that, option traders expect the stock to go up, rather than down.

How About Volatility?

The IV rank (the purple line) for NEM (stock price in blue) is currently hovering around 40.34, which is fairly elevated. This makes short strategies (which are what I prefer) more attractive.

What’s the Trade?

My preferred trade is a variation of the wheel without the rolling, AKA cash-secured puts. I typically like to target stocks that offer a dividend and are below fair value. 

Why a dividend? If the trade results in assignment and I’m on the hook for X amount of shares, I can at least be satisfied knowing I picked a (hopefully under fair value) company that will pay me a small amount while I run the other side of the trade AKA covered calls.

It’s a fairly low-risk strategy (all options trading is risky!), that has a higher probability of success, but requires a higher amount of collateral. 

NEM does offer a dividend with a yield of 1.71%.

So if you saw the most recent image above, I already STO (sold to open) 2 contracts of the $52 put for the August 29th expiration. I like to have a DTE (Days To Expiration) that is around ~45 days.

When the trade reaches 50% profit I will buy it back. I don’t like to be greedy and go for more profit, because I would rather not waste my time being in a trade for too long.

What About Alternative Trade Ideas?

1. If the collateral requirement is too high, another idea is a put credit spread. You would sell a put at a strike below the current share price and then buy a put at a lower strike than the put you sold. By doing so, you will avoid the collateral requirement of a cash-secured put, but the credit received will be smaller. Also, if the trade goes sideways, you will not be assigned shares so no collecting dividends and running covered calls afterwards.
2. Just invest! 1 share or even fractional shares are a way to get a foothold in a stock that you think might increase in value.

Wait…Where Are the Candlesticks? And All the Other Indicators?

I know many traders love their candlesticks and a ton of indicators. I prefer simplicity. Candlesticks aren’t necessary unless you’re the kind of trader that wants to try and pick the perfect moment to execute a trade, and even then it’s not a sure thing. 

As for indicators, there are a ton. Some of them work sometimes. None are perfect. I don’t want to get bogged down with too many. You’ll drive yourself crazy looking at too many of them, so find a handful you like and stick with those.

Disclosure

• I currently have open trades with NEM (as mentioned in this post).
• No trade is a sure thing. There is always risk involved. 
• This blog post is not meant to take the place of financial advice, but hopefully acts as a guide for learning or informational purposes.