Trade Adjustment : MCP

Stock / Symbol: MolyCorp / MCP

Option Strategy: [private_monthly]combo (short put/long call), AKA synthetic long stock[/private_monthly]
Trade entry date: Feb 23
Price at trade entry: $28.66
Price at Mar 1 adjustment: $25.19
Price at this post: $31.20

Current Position:
Long 1 MCP Mar12 32.5 call
Short -1 MCP Mar12 27.5 call
Short -1 MCP Mar12 26 put

Reasoning: Well, thanks to an unexpected announcement that MCP is purchasing rare earth processor Neo Materials, and a comment from President Obama that US Co's need access to rare earths, MCP is actually where we thought it would be when we originally put the trade on.[private_monthly] Unfortunately, our previous adjustment has us down on the trade. In order to salvage the trade, we're going to close the current call positions and then roll our short put to a Jun exp 29 strike put. If MCP is under $29 by Jun expiration, we'll be forced to purchase 100 shares at $29. If that happens, we'll write a call, making the trade a covered call.

Trade Details:

BTC -1 MCP Mar12 27.5 call
STC 1 MCP Mar12 32.5 call
for a net debit of $3.30 per contract (or best price)
BTC -1 MCP Mar12 26 put
STO -1 MCP Jun12 29 put
for a net credit of $3.35 (or for a credit at/equal to debit to close the call spread)

Max Risk: $2,900 (adjusted from $2,560)
Profit Range: $29+ by Jun exp
Max Profit: $5 with MCP between over $29 by Jun exp
Suggested Stop @: 22.90
Non-members, click here for access

Speak Your Mind