Wednesday, January 18, 2012

Molycorp (MCP) - Depressed Vol Returns, Stock Moves in Two Weeks

MCP is trading $29.46, up 3.0% with IV30™ down 9.4%. The LIVEVOL® Pro Summary is below.


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Molycorp, Inc. is a rare earth oxide (REO) producer in the Western hemisphere and owns a rare earth project outside of China. The Company is in development stage. The Company focuses to be an integrated producer of rare earth products, including oxides, metals, alloys and magnets.

I last wrote about MCP just thirteen days ago (1-5-2012). You can read that post here:
Molycorp (MCP) - Depressed Vol in Stock Down 60% in 6 Mos.

At the time of that last post, MCP was trading $25.33 with IV30™ at 63.24%. The Livevol® Pro Summary at the time is included below.

The post two weeks ago was centered around the low vol in MCP and how the stock was down 60% since August of 2011. Today the vol is dropping hard, back to the levels from a couple of weeks ago, but the stock is now ~$4 higher. Let's turn to the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).

Two things to note since the last post:

1. We can see the stock rise in essentially in a straight line from $25 to $29.
2. The drop in the implied today has actually pushed it below the levels at the time of the post on 1-5-2012.

The implied is still trading well below the two historical measures. Specifically:

IV30™: 62.87%
HV20™: 75.59%
HV180™: 82.37%

Those same vol comps thirteen days ago were:

IV30™: 63.24%
HV20: 74.15%
HV180: 82.19%

So, scary similar. The Jan ATM straddle at the time (25 strike) was $2.43 x $2.53. That same straddle is quoting $4.30 x $4.43, today. In English, that straddle has increased in value by 76% in less than two calendar weeks.

Let's turn to the Skew Tab.

The back two months show a pretty normal skew. The front expiry has just two days and two hours before expiration so the wings are super bid. I have included the skew chart from the prior post, below.

We can see a similar shape across the front three months. For both of these snapshots, the Mar options show the highest ATM vol -- this is likely due to the next earnings release which should be in the Mar options but outside (after) of Feb.

Finally, let's turn to the Options Tab for completeness.

The monthly vols are 59.11%, 62.87% and 68.28% for Jan, Feb and Mar, respectively. The ATM Feb straddle (29 strike) is quoting $4.16 x 4.30.

This is trade analysis, not a recommendation.

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