Tuesday, March 07, 2006

Heavy Metal

In the midst of all this action I almost overlooked the Metal Miners sector. First off, I absolutely love the volatility here. At 45 vol underperforming realized volatility in major names (PD, CLF, PCU, etc) we can be buying April premium to take advantage of the oversold condition and sell near-term premium because with downside becoming more and more limited it is so darn overpriced. (Yes, I did say overpriced, even though implied vol is actually below statistical)

So, we're selling CLF March 80 puts and looking to buy April 80 calls once the stock trades lower. PD March 150 calls are similarly expensive and we are legging into short vertical with every uptick we get.

This is the sector to be aggressive on. Get in there and trade it.

Cheers,
/Dmitry

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