Bearish options active on Molycorp Inc (MCP) as shares nosedive

Molycorp Inc (NYSE:MCP) – Shares in rare earth metals mining company, Molycorp Inc (NYSE:MCP), are reeling Thursday morning after the Greenwood Village, Colorado-based company missed its 2012 production target and lowered its 2013 revenue and cash estimates. The stock is currently down 24% on the day to stand at $8.20 as of 11:00 a.m. ET. Analysts at JPMorgan cut their price target on the stock to $5.00 from $8.00 today. Options traders positioning for shares to weaken further by the end of this week initiated bearish plays in weekly put contracts. Put volume is on the rise at the Jan 11 ’13 $9.0, $8.5 and $8.0 striking prices this morning. Traders appear to have purchased around 1,100 in-the-money puts at the $9.0 strike, and another 2,350 lots at the $8.5 strike in the early going. The $8.0 strike puts have traded upwards of 2,200 times thus far today versus zero previously opened positions, with the bulk of the contracts purchased for an average premium of $0.13 apiece. Traders long the Jan. 11 ’13 $8.0 strike puts stand ready to profit at expiration this week should Molycorp’s shares decline another 4% from the current price of $8.20 to breach the average breakeven point at $7.87. Molycorp Inc (NYSE:MCP) shares, down more than 70% since January 2012, last traded below $7.87 on November 23rd.

Bearish options active on Molycorp Inc (MCP) as shares nosediveIAC/InterActiveCorp (NASDAQ:IACI) – Options activity on media and Internet company, IAC/InterActiveCorp (NASDAQ:IACI), this morning indicates one trader is preparing for shares in the name to potentially decline in the near term, perhaps following the company’s fourth-quarter earnings report in February. Shares in the operator of online dating websites, match.com and okcupid, are down more than 3% today at $43.99 as of 11:15 a.m. in New York. The single-largest transaction in IAC/InterActiveCorp (NASDAQ:IACI) options this morning was the purchase of 1,500-lot Feb. $40/$45 put spread for a net premium of $1.55 each. The bearish spread makes money if shares in IAC/InterActiveCorp (NASDAQ:IACI) slip 1.2% from the current level to trade below the breakeven price of $43.45. Maximum potential profits of $3.45 are available at expiration next month in the event that shares in the media company drop 9% to a new 52-week low of $40.00.

Linkedin Corporation (NYSE:LNKD) – Shares in online professional network operator, Linkedin Corporation (NYSE:LNKD), are rallying Thursday after the company announced yesterday it has reached 200 million members. The milestone marks an increase of more than 13 million members since its last announcement on November 1, 2012, according to a statement on the company’s website. LinkedIn shares jumped 5% to an intraday high of $119.37 at the start of the session after the stock was rated new ‘outperform’ with a price target of $133.00 at CLSA. Options traders snapping up weekly call options on Linkedin Corporation (NYSE:LNKD) this morning are positioned to profit should the price of the underlying extend gains in the near term. The Jan. 11 ’13 $120 strike calls are the most active of the weekly contracts with one full trading session remaining to expiration. Upwards of 2,500 $120 strike calls changed hands before midday on the East Coast, and it appears most of the contracts were purchased for an average premium of $0.49 each. Call buyers stand ready to profit at expiration this week should shares in LinkedIn rally above the average breakeven point at $120.49. Bullish positioning on the stock spread to the Jan. 18 ’13 $125 strike, where roughly 400 calls were purchased for an average premium of $0.31 apiece. Traders long the $125 strike calls that expire next week may profit in the event that shares rally another 5% to surpass $125.31. Shares in the name last traded above $125.31 in mid-September 2012 when the stock reached an all-time high of $125.50 on an intraday basis.

Caitlin Duffy

Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

This material is not intended as an offer or solicitation for the purchase or sale of any security or other financial instrument. Securities or other financial instruments mentioned in this material are not suitable for all investors. Any opinions expressed herein are given in good faith, are subject to change without notice, and are only correct as of the stated date of their issue. The information contained herein does not constitute advice on the tax consequences of making any particular investment decision. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation to you of any particular securities, financial instruments or strategies. Before investing, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.

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