2 Groups Cash In as Molycorp, Inc. (MCP) Goes Belly-Up

Molycorp Inc (NYSE:MCP) filed for bankruptcy protection overnight

by Alex Eppstein

Published on Jun 25, 2015 at 10:29 AM
Updated on Jun 25, 2015 at 10:30 AM

Rare earths specialist Molycorp Inc (NYSE:MCP) has filed for Chapter 11 bankruptcy, after failing to turn a profit for roughly four years. Unhedged shareholders have gotten destroyed in the process -- particularly if they bought in 2011, when the now-valueless stock was flirting with the $80 mark. On the other hand, option bears and short sellers have been cheering MCP's demise.

During the last 10 days at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open nearly 16 puts for every call. The resultant put/call volume ratio of 15.83 ranks above 99% of comparable readings from the past 52 weeks. In other words, option players have rarely initiated long puts over calls at a faster pace.

In a similar vein, MCP's Schaeffer's put/call open interest ratio (SOIR) checks in at 1.81 -- with short-term put open interest nearly doubling call open interest. Also, this SOIR sits in the put-skewed 77th percentile of its annual range.

Elsewhere on the Street, one-quarter of Molycorp Inc's (NYSE:MCP) float is sold short. These short sellers have attained their maximum potential profit, as the shares are currently worthless and in the process of being delisted.

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