Never do I contemplate blogging about a trade, but the rarity of documenting my spontaneous trade ideas has forced me to finally sit down and spill. My new trading idea is as rare as i blog. The idea began when news recently turned uber bullish on the sector, as China limited exports on this sector and the world demanded more and more of it. If you're still clueless about what I'm alluding to, the sector is none other than the Rare Earth Metals.
My trade is focused on MCP (MolycorP) the only producer of rare-earth oxides in the Western Hemisphere, currently ramping up production at its facility in Mountain Pass, Calif., one of the world’s richest and largest rare-earth deposits.
Thesis: Not only have rare earth prices spiked in the past 6 months, there appears no sign of lower prices as week after week China reasserts its policy of limiting exports. However, the metal price alone is not what's driving me into this trade. As Oil prices continue to climb as I predicted on Facebook back in November with a price objective of $150 within 6 months, (I know pple thought i was CRAZY!) alternative energy will be the talk of the town. Wouldn't you know what most alternative energy are composed of, the currently hard to find rare earth metals!
The Trade: As the company has digested its secondary offering, hovering below the $50 mark, I expect a new fuel of buyers to march the stock above the $60 level before April.
I bought MCP $60 April calls for 75 cents.
I intend to milk this for as long as i can, meaning i'll wait until April to close it even if im up 300% on it.
