Markets

Bears digging into Rare Element

Rare Element Resources has made a giant move, but now traders seem to think that what goes up might also go down.

REE

optionMONSTER's Depth Charge tracking system detected heavily bearish activity in the mining stock yesterday. The once-obscure Canadian company burst on the scenes earlier this month with a surge of bullish activity following a rally of more than 200 percent in the preceding seven weeks.

The puts saw heavy volume, especially at the November 10 and the November 12.50 strikes. They traded about 5,000 contracts and 3,500 contracts respectively. Most of the November 10s were sold, suggesting that some investors wrote them against long positions in the 12.50s to leverage a drop in the share price.

REE fell 11.51 percent to $11.30 yesterday. The company, which only went public in January, owns property in Wyoming with deposits of so-called rate-earth elements, a set of 17 obscure elements including scandium and yttrium.

There don't appear to be any headlines on the stock, but the rally may have resulted from a Chinese embargo on some of the same materials. Beijing reversed the policy yesterday, which may have also contributed to REE's sharp drop.

The name also saw heavy call volume yesterday, though most of the contracts were sold. In contrast, the Depth Charge showed that most of the puts were bought. Together, the activity reflects concern about a decline.

Some 43,691 contracts changed hands in the session, more than 7 times greater than average.

(Chart courtesy of tradeMONSTER)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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