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Goldcorp: A Value Play In Gold?

|Includes:Goldcorp Inc. (GG)

Tim Biggam, TradingBlock (May 2, 2012, 3:14 pm CDT)

Symbol Analyst Target Price Target Date
GG 40.00 July 20, 2012
Click to enlarge

Goldcorp Inc. (ticker: GG) engages in the acquisition, development, exploration, and operation of precious metal properties. It primarily explores gold, silver, copper, lead and zinc. The company's principal mining properties include locations in Canada, Mexico, Guatemala, Argentina and the United States.

The recent news, both on the earnings front and political side, has put a serious hurt on shares of GG. Shares have fallen over 25% since March 1st, with GG dropping from the 50 level to under 38. GG is now trading at the cheapest to spot gold ever, as the ratio of GG to GLD reaches another lifetime low.

With physical gold holding to support around the 1650 level, I would look for GG to begin to base as well, and then slowly move higher.

Given my somewhat bullish outlook for gold over the coming quarter, I feel GG will move to the 40 level by July expiration.

Play of the Day

Based on Goldcorp's (ticker: GG) current market price of $38.10 and using a target price of $40.00, a target date of July 20, 2012 and $1,000 of investment capital, below are three options strategies (ranked by potential profit) and a comparative stock trade to consider should the price target be achieved at the target date.

Click on the strategy name below to access trade details using TradeBuilder on TradingBlock.com. Powered by TradingBlock's TradeBuilder.

Strategy (click for details) % Return at Target Probability of breaking
even or better
Buy Jul Put Butterfly +148% 76%
Buy Jul Call Spread +97% 53%
Sell Jul Put Spread +83% 58%
Buy Stock +5% 56%
Click to enlarge

* Click link to access TradeBuilder details on TradingBlock.com. Must have Instant or Actual account. Subject to change due to changing market conditions. Click here to view risks regarding selling stock short.

DISCLAIMER: This content is provided for educational and informational purposes only. Evaluate any strategy prior to use to understand risk and suitability. TradingBlock does not endorse or warrant any Market Analyst content, service or product. Use this content at your own risk without guarantee or warranty of any kind from TradingBlock. Tim Biggam is a TradingBlock registered representative. He is not compensated by TradingBlock for any market research or analysis services. He currently does not hold any positions in GG.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: GG