Options Corner: Barrick Mining's Crowded Bullish Trade Invites A Quick Downward Scalp

Barrick Mining Corp (NYSE:B) easily ranks among the hottest securities in the gold market, having gained 18% since the start of January. Additionally, over the past 52 weeks, B stock skyrocketed to the tune of 220%. Still, with so much enthusiasm baked into the security, the immediate concern is that a corrective lull may transpire. Those who are aggressive can use options to scalp some profits on this possible downside.

To clarify, the long-term narrative for Barrick stock appears robustly bullish. Fundamentally, one of the biggest catalysts of the precious metals complex is demand from central banks. According to the World Gold Council, this institutional acquisition has now averaged roughly 60 tons per month, more than triple the pre-2022 pace. Combined with industrial (particularly tech sector) demand for silver and other important commodities, the overall framework is compelling.

Still, the equities market is non-ergodic, meaning that even though the longer-term performance may be positive, the chart can temporarily be punctuated by negative price action. This non-ergodicity is best expressed in the options market, where traders effectively buy insurance against either downside or upside risk.

In the case of B stock, exposure to the bullish narrative is clearly overcrowded. We're talking about a security that has gained over 140% in the past six months. Because of this rally, bullish conviction is no longer the dominant theme in the options market.

Looking at volatility skew — a screener that identifies implied volatility (IV) or the target stock's expected kinetic outlook — put option IV is mostly priced higher than call IV across the strike price spectrum for the Feb. 20 expiration date. That's an obvious signal that smart money is prioritizing downside protection by effectively buying volatility insurance and also being synthetically short B stock to protect the underlying holdings' value.

Of course, the smart money isn't automatically prescient. However, in this case, there's a quantitative reason to go with the pros.

Mining A Second-Order Analysis For B Stock

According to the expected move calculator — which is a Black-Scholes-derived pricing tool — B stock may range between $45.98 and $57.02. This calculation stems from the assumption of where the stock may fall symmetrically one standard deviation away from the current spot price (while accounting for volatility and days to expiration).

Without getting too bogged down by the math, the Black-Scholes model is saying that in 68% of cases, Barrick stock at the end of the Feb. 20 session should land between about $46 and $57. And while this dispersion is insightful as it lays out the likely battlefield, we're still unsure as to where the stock will likely touch ground. For that, we can apply a second-order analysis using the Markov property.

Under Markov, the future state of a system depends entirely on the current state. In other words, forward probabilities should not be calculated independently and in isolation but rather be assessed under context. To use a simple sports analogy, a 20-yard field goal is an easy chip shot. Add snow, wind and playoff pressure and these odds may change quite dramatically.

For B stock, the current context is that in the trailing 10 weeks, the security printed seven up weeks, leading to an overall upward slope. Under this 7-3-U sequence, the forward 10-week returns would be expected to range between $48 and $53. That' s significant because under aggregate conditions, Barrick stock would be expected to range between $51.50 and $52.30.

Stated simply, when B stock encounters extended bullishness, a corrective lull tends to materialize. It's probably not going to be a permanent lull, allowing aggressive speculators to potentially pounce on the temporary downside.

Further, over the next five weeks, Barrick stock would be expected to drift away from its current range and toward $49. Since it has already enjoyed a robust performance, the speculation is that some temporary digestion may occur.

Going For A Bear Put Spread

Given the current backdrop, an appealing idea may be the 50/49 bear put spread expiring Feb. 20, 2026. This wager involves two simultaneous transactions: buy the $50 put and sell the $49 put, for a net debit paid of $51 (the most that can be lost).

Should B stock fall through the second-leg strike ($49) at expiration, the maximum profit would be $49, a payout of over 96%. Breakeven lands at $49.49, helping to enhance the probabilistic credibility of the trade.

It should be noted that under 7-3-U conditions, probability density would peak around $51.50, which is only slightly below the current market price. However, the bigger picture is that when this quantitative signal flashes, Barrick stock transitions from having a bullish bias to a bearish one. Therefore, the wager is that we can grab this anticipated digestion, secure the profit and reset for the next sequence.

Keep in mind that this is not a call to short Barrick Mining. Instead, we're anticipating that B stock might encounter a slight pothole. For the most aggressive, we can try to scalp some value in this hiccup before reengaging the bullish narrative.

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