REEs consist of roughly 17 mineral types which naturally occur in ore deposits. These materials are used in industries ranging from aerospace to downstream oil and gas, with specific applications in nuclear batteries, fluorescent lamps, stainless steel, and various laser types. Of most interest to traders is the fact these elements are not exchange traded like metals, but sold only on the private market making price tracking difficult. Compounding this problem is they are not usually sold in pure form, but in mixtures of varying purity based on the use case.
Despite the forecast for increased demand, Molycorp announced a loss of $0.44 per share on their call. The company misses production targets significantly in their California mine – demand for REEs is inconsequential if you can’t fill the orders. The most positive recent news the company, which while sitting on the largest REE mine in the world can’t seem to meet production targets was a recent SEC announcement. In July, the SEC announced their would be no enforcement action regarding ‘irregularities in the company’s public disclosures.’
Yesterday’s Earnings Trade:Selling the MCP Weekly 7-8 Bear Call Spread for $0.44 Credit.
This is selling the Weekly 7 Calls and buying the Weekly 8 Calls
My Risk: $56 per 1 lot
My Reward: $44 per 1 lot
My Breakeven: $7.44
Greeks of this Trade:
Delta: Short
Gamma: Short
Theta: Long
Vega: Short