Thursday, April 7, 2011

Rare Earth: Options in Play-- Rare Element Resources (REE; GS)

The story also comments on Goldman calls.
From Schaeffer's Investment Research:
...Call volume has accelerated to 1.94 times the expected level on GS, with approximately 33,000 contracts crossing the tape so far. Most active is the equity's out-of-the-money weekly 165 call, where 5,675 contracts have been exchanged.

Quite a few of these calls traded closer to the bid price, implying they were sold, and today's volume is comfortably outstripping open interest of 2,893 contracts. In other words, it looks as though traders are selling to open calls at the weekly 165 strike today, in hopes that GS will remain at or below $165 through the end of the week.

GS is fractionally higher at last check, as traders digest last night's news that the firm will purchase the remaining 55% of its Australian unit that it doesn't already own. The stock is attempting to collect a daily close above its 50-day moving average for the first time since Feb. 18.

REE price chartCalls are also the options of choice on REE, with about 21,000 contracts trading so far -- representing about four times the norm. The most active strike is REE's April 15 call, where 4,205 contracts have crossed the tape. The majority of these calls traded closer to the ask price, indicating they were purchased, and implied volatility on this front-month option is up 2.8 percentage points at 72.8%.

Checking out the charts, the $15 level has been critical for REE lately. This region capped the stock's progress back in early February, with the rejection here preceding a steep decline in the share price. However, REE has rallied about 15% in today's session, once again testing the waters in the closely watched $15 region.