Option Bears Shouldn't Rush to Fade the Molycorp Rally
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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.
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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