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Option Bears Shouldn't Rush to Fade the Molycorp Rally

Posted By: Todd Salamone 12/11/2012

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Examining Rising Implied Volatility on MCP Options
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Trader Comments

Todd Salamone:

Tony V. makes a great point about the -50% YTD/double low coming in around $11.50- this level could be a major speed bump for MCP.  Expanding on my implied volatility points in the chart - near-term call implieds in the 80-percent range are cheap relative to MCP's 20-day historical volatility of 107 percent.  And January call implieds are even cheaper at 68%, with March calls at 62%.  Playing Jan or March calls would be a better way to play a continuation move to the upside with the $11.50 speed bump in mind.  If you are bearish, sideways movement around $11.50 could be followed by a decline in put implieds, which would make it a cheaper play down the road for bears.  Bearish put spread would be an option strategy for MCP bears at this juncture, but you are limiting your profit potential.

Tony Venosa:

One interesting tidbit on MCP is that it hit $11.50 today which is near the -50 percent year-to-date level and double the mid-November low.

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