The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- Strategic Mindset: The
Top Gun Options trading team is short-term bullish on this target.
Commit Criteria: MCP is a rare earth minerals miner based out of California. Yesterday their largest competitor was blocked from exporting from China due to environmental reasons. (Bautou Steel-accounts for more than half of rare-earth minerals)
The stock is trading near its 52-week low and could see a moderate bounce.We are primarily trading the news, which could fundamentally add significant value to the company's exporting business.
Tactic: Long Call Vertical
Buy to open 25 January 27.5 calls
Sell to open 25 January 32.5 calls
For a debit of $1.24 (depending on market open)
Max Risk = $ 3,500
Max Reward = $ 5,650
Break Even point at $ 28.74 at expiry
Eject Level: If the spread losses 50% of its risk, then I will close the trade. So if the spread level reaches $.60 I will look to closing the trade.
Profit Exit: As the spread gains value past the $2.50 level I will begin to move my trailing stop loss to the $2.00 to lock in any profits if spread value drops.
Exit: Sell 25 Jan MCP 27.5 calls for a debit
Buy 25 Jan MCP 32.5 calls for a credit
Firing Line: We believe the news is without a doubt a price changer in the bullish direction for this stock -- just how far, we do not know. We decided to put the legs of spread $5 apart and increase the number of spreads from 20 to 25. Let the rare earth export fireworks begin. China is holding back supply to get prices up, and it usually works out well for the miners. Make sure you stop by the
Top Gun Options Facebook page and click 'Like' to get a copy of our 15 page proprietary trade plan. Merry Christmas and make sure you hedge!
This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.