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What's up with Vista Gold (VGZ)?

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August 25, 2010 – Comments (8) | RELATED TICKERS: VGZ

Can anyone explain why Vista Gold (VGZ) is up so much (more than 70% in 2 weeks)? None of their competitors jumped up like that!

Disclosure: long VGZ at the time of writing

8 Comments – Post Your Own

#1) On August 25, 2010 at 12:59 PM, SultanOfSwing (32.38) wrote:

AAU did (is).  Plus it announced 2M oz. reserves of gold today.  Plus a feasability study in, get this, the Batman mine!

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#2) On August 25, 2010 at 1:08 PM, leohaas (30.09) wrote:

Thanks for finding another company that made a similar move.

But the reserves announcement is a week old! The big jumps up occurred 2 days before the announcement, and a week after. And how serious can one take a company press announcement anyway?

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#3) On August 25, 2010 at 2:24 PM, SultanOfSwing (32.38) wrote:

Yeah.  That would explain the gap up on the 19th, maybe.  I don't know what's causing the jump today other than reported heavy call volume.  Nevertheless,  good luck on your long position.

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#4) On August 25, 2010 at 2:39 PM, Valyooo (33.72) wrote:

That is what I would like to call a manipulated stock.

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#5) On August 25, 2010 at 6:13 PM, EnigmaDude (62.21) wrote:

SoS is correct - heavy call option volume is responsible:

http://www.forbes.com/2010/08/25/jcrew-vista-gold-markets-options-continental-airlines.html?

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#6) On August 26, 2010 at 12:52 PM, leohaas (30.09) wrote:

I read another article about the unusually high call option volume. But I fail to see how that would be driving the stock price. Or are there really a lot of people out there who run screens on option volume and use that as a trigger to get into the stock? And if that is the case, what did these option traders use as their trigger?

Considering what I have read here (and the little I was able to unearth from other sources), maybe comment #4 is closest to the truth. In that case, I will sell and need a different small gold miner (I believe gold will go up because of the declining trust in the dollar, and that small miners will be better poised to take advantage than large miners). Any suggestions?

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#7) On August 26, 2010 at 1:38 PM, mhy729 (30.26) wrote:

I think the GDXJ ETF would be a good choice.  Of course if you are a good stock picker it would be better for you to choose individual miners, but with this ETF you mitigate the risk of being hit by an unforeseen negative development cratering your pick.  If you can spread it around several individual miners carefully selected that might be better (the management fee isn't too high and it is quite liquid so those aren't concerns).  TMFSinchiruna had a relatively recent article regarding junior gold miners.  And JAG, which is featured in the article, is a good example of a junior miner that got hammered after negative news during Q2.

The GDXJ ETF does have significant exposure to silver, so it isn't a strictly pure gold play.  I don't find that a bad thing as I like the investment case for silver, perhaps even more than that for gold.

Regarding the high call option volume driving up a stock price, I recall reading somewhere about there indeed being a correlation between call/put option volume and stock movement.  The question is whether the option traders have special knowledge to predict future stock movement, or there is perhaps some form of self-fulfilling prophecy where people pile into a trend.  I often wonder about technical trading, and whether the patterns hold true because people expect them to and trade accordingly and thus create the movement they were expecting.

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#8) On August 27, 2010 at 12:58 AM, Tastylunch (28.52) wrote:

Insider trading.

the option actvitity is not the cause but the effect. If you got insider info option trading is the bets way to play it. Just look at the Perot Systems options activity leading into the Dell buyout.

I have no hard proof but I've been seeing a lot of stocks take off or crash well ahead announcements far too often lately. I saw another rash of this in another sideways market in 2004. perhaps it's just easier to spot in choppy markets.You know it's not an accident when they get the direction right two to three days in advance.

How people knew to sell CRME hard two days before earnings without inside info is beyond me. And the same seems to be true of VGZ. It's either being manipulated or someone has leaked info.

It's effing BS and it makes me very angry.

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