Seabridge Gold (NYSE:SA), which specializes in the acquisition and exploration of gold, saw its shares pop 3% higher on Monday. Sentiment has been strong in recent sessions amid encouraging fundamentals for the precious metals sector. As a result, it appears that options traders are bidding up SA stock derivative contracts.

The enthusiasm for gold-related companies makes plenty of sense. As The Wall Street Journal pointed out recently, the Federal Reserve may be poised to lower the benchmark interest rate. With the central bank witnessing positive developments regarding inflation and the broader labor market, it’s “very possible” that a more accommodative policy could be put in place in September.

Theoretically, such a move should lower borrowing costs, which would then spur economic activity. At the same time, it will likely also translate to more dollars chasing after fewer goods. That would be inflationary, which should support a higher valuation of SA stock. Moreover, the anticipation that dollars earned today will be worth less tomorrow should lift the underlying gold price.

This framework has many speculators excited and that’s quite evident in the derivatives market.

Unusual Options Activity Highlights Strong Interest in Seabridge Gold

On Monday, SA stock represented one of the key highlights in Barchart’s screener for unusual stock options volume. By analyzing unusual activity in the derivatives ecosystem, retail investors may be able to decipher where the smart money is putting its funds to work.

Regarding SA stock, total volume hit 5,619 contracts against an open interest reading of 58,612 contracts. Further, the magnitude difference between Monday’s volume and the trailing one-month average came out to 172.5%. Further, call volume stood at 5,273 contracts while put volume sat at only 346.

More significantly, Barchart’s options flow screener – which filters exclusively for big block transactions likely placed by institutional investors or professional traders – showed that for the June 29 session, option premiums with bullish sentiment clocked in at $142,700. On the other hand, option premiums with bearish sentiment landed at $65,100 below breakeven. Overall, the net trade sentiment for the day was $77,600, favoring the optimists.

Another interesting factor to consider is that SA stock may be a J-Hook candidate, according to Barchart’s algorithms. This sinusoidal technical pattern essentially represents an attempted breakaway from a consolidation phase. Interestingly, the signal is flashing amid favorable fundamentals and strong options sentiment.

Judging from the long-term chart, it appears that Seabridge bulls are attempting to push SA stock to $19, which has acted as long-term resistance since 2020.

Trade of the Day: Consider Long-Expiry SA Stock Call Options

For Tuesday’s Trade of the Day, I believe it makes sense to mimic one of the trades found in the options flow screener: the 2025 Feb. 21 $19 call option. Yesterday, total volume for this derivative reached 124 contracts (against open interest of 63). Notably, the options flow data notes that 104 of those contracts stemmed from likely institutional or professional traders.

Of course, with SA stock being relatively cheap in the open market, there’s not much volume in the derivatives arena. That opens the door to wide bid-ask spreads and other risks. Normally, you wouldn’t want to play around with low-volume options. However, the smart money appears to sense an upside prospect here.

Again, combined with the compelling fundamentals and technical indicators, SA appears poised for upward movement. If you can handle the unpredictability of small-capitalization gold stocks, be sure to give Seabridge a look.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.