Molycorp (MCP) - Depressed Vol Returns, Stock Moves in Two Weeks
Ophir Gottlieb | Jan 19, 2012 02:40AM ET
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.
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.
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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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