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Molycorp Traders Bet On a Bullish End to the Week

Call volume is nearly tripling put volume on MCP today

by 12/26/2012 12:41 PM
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Molycorp Inc's (NYSE:MCP - 9.82) almost 3% pop in today's session has calls outpacing puts by a margin of nearly three-to-one. MCP's 12/28 10-strike call has emerged as the most actively traded option so far, with roughly 1,500 contracts crossing the tape. The majority of these have changed hands at the ask price and implied volatility was last seen 11.7 percentage points higher, suggesting buy-to-open activity.

By purchasing these near-the-money calls for a volume-weighted average price (VWAP) of $0.17, traders need MCP to finish north of the $10.17 mark (strike price plus VWAP) by Friday's close, at which point these weekly options will expire. This breakeven level represents a 3.6% premium to the stock's current perch.

Today's tendency toward calls is a change of pace for option traders. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day put/call volume ratio of 0.46 ranks higher than 88% of other such readings taken in the past year. In other words, puts have been bought to open over calls at a faster-than-usual clip during the last 10 weeks.

On the charts, MCP has been in a solid uptrend in recent weeks. In addition to outperforming the broader S&P 500 Index (SPX) by more than 10 percentage points over the past month, the stock has bounced roughly 71% off its year-to-date low of $5.75, which it tagged on Nov. 16.

As mentioned, MCP is soaring in today's session on no apparent news. At last check, the security was lingering near the $9.82 mark.


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