Options Trading News

November 20, 2012  Tue 2:45 AM CT

Traders turned bullish on Molycorp yesterday as the rare-earth producer bounced off all-time lows.

More than 6,400 January 8 calls traded in a strong buying pattern in volume that exceeded open interest at the beginning of the day, according to optionMONSTER's Heat Seeker tracking system. The action was led by one block of 2,000 and two blocks of 1,000 and 2,000, all going for $0.32.

MCP, which mines rare minerals used in cellphones and other electronics, rose 8.16 percent yesterday to close at $6.63. Shares hit a lifetime low of $5.75 in the previous session, continuing their steep descent since hitting a 52-week high of $35.79 in early April.

Yesterday's call buyers are betting that MCP will gain more than 25 percent by expiration in mid-January. Those options could be sold earlier at a profit if premiums rise before then, but the calls will expire worthless if the stock doesn't rally. (See our Education section)

Total option volume in the name was triple its daily average. Calls outnumber puts by more than 4.5 to 1, a reflection of the bullish sentiment.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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