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Calls were the options of choice on Molycorp Inc (NYSE:MCP) yesterday. By the numbers, 7,432 call contracts crossed the tape, nearly tripling the number of puts exchanged. Although not as optimistic as last Tuesday's bulls, Monday's traders forecast additional upside for MCP through week's end. The stock's weekly 4/12 5.50-strike call was by far the most active strike on the day, where 2,768 contracts traded for a volume-weighted average price (VWAP) of $0.10. The majority of the contracts crossed at the ask price, implied volatility soared 11.7 percentage points, and open interest rose overnight, pointing to buyer-driven volume.
By initiating the at-the-money calls, traders will begin to profit with each step north of $5.60 (strike price plus the VWAP) Molycorp Inc (NYSE:MCP) takes through the close on Friday, when these weekly options expire. Thanks to today's move higher, MCP is sitting just 1.8% below this breakeven mark. Risk, meanwhile, is limited to the initial premium paid.
From a wider sentiment standpoint, short-term speculators have favored puts over calls in Molycorp's options pits, as evidenced by the stock's Schaeffer's put/call open interest ratio (SOIR) of 1.06. Not only does this show that put open interest outweighs call open interest among options expiring in three months or less, but it ranks in the 95th percentile of its annual range. In other words, near-term traders have been more put-heavy toward MCP just 5% of the time within the past year.
Technically, Molycorp Inc (NYSE:MCP) has been a long-term laggard, with the shares off roughly 83% year-over-year. More recently, the stock has lagged the broader S&P 500 Index (SPX) by more than 54 percentage points during the past 60 sessions. However, the equity has shown some signs of life lately, with the stock up 13.2% from its all-time intraday low of $4.86, which was recorded on April 1.
The recent rebound is continuing in today's session, with Molycorp up 3% to trade at $5.50. The equity is now on pace to chalk a second straight daily close atop its 10-day moving average -- a feat not accomplished since mid-March.