Options Volume Accelerates on Molycorp, Inc. (MCP)

Molycorp Inc (MCP) is running into resistance at its 80-day trendline

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Published on Feb 4, 2015 at 1:52 PM
Updated on Apr 20, 2015 at 5:09 PM

Molycorp Inc (NYSE:MCP) options are flying off the shelves this afternoon, amid the rare earths stock's 1.5% dip. By the numbers, calls have a slight advantage over puts -- 25,000 contracts to 24,000 -- and are crossing at 10 times the expected rate for this point in the day.

Looking more closely, MCP is seeing potential buy-to-open activity at a number of strikes, including the out-of-the-money June 1 call and March 0.50 put. The call buyers expect the shares to muscle atop the $1 mark by June options expiration. However, in order to do so, the stock will needle to hurdle its descending 80-day moving average -- which rejected an advance earlier today -- currently resting at $0.95. By contrast, the put traders anticipate MCP will settle below $0.50 by the close on Friday, March 20, when back-month options expire.

From a wider vantage point, long calls have held a decisive advantage over long puts in recent weeks. MCP's 10-day put/call volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) stands at 13.67 -- above 88% of similar readings from the previous 12 months. However, some of these bets may have been initiated by short sellers hedging -- considering nearly 28% of the equity's float is sold short, which would take more than three weeks to buy back, at typical trading levels.

On the charts, Molycorp Inc (NYSE:MCP) has put on a disastrous performance over the last 52 weeks. Specifically, the shares are down 83% year-over-year to hover around $0.79.

Daily Chart of MCP since February 2014 with 80-Day Moving Average
Chart courtesy of StockCharts.com

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