Lundin Mining has emerged on my radar as a possible good call option case. This analysis focuses on the Swedish stock and its options, whereas the stock itself is also listed on the German and Canadian stock markets. Let’s investigate if this is a good time to enter a such position. (The above picture, courtesy to LundinMining.com – Company Presentation 2015-11).
The case is to buy call options with exercise price around 30 SEK which matures on 2016-06-17, which currently trades at 1,25 each, i.e. 125 SEK per contract of 100 underlying stocks, excluding commission. See picture below, in Swedish.
Let’s take a look at the stock.
On this five year graph we can see how the stock is down to its 5 year lows.
On this one year graph we can see how the Bollinger bands have started to tighten which could be signaling a future outbreak in some direction. The RSI hints us that the stock currently is close to oversold levels.
I will track this stock in order to find a reason to enter this call option position and I plan on announcing my position in this blog immediately once I have entered it. What signals should we look for in order to enter this position?
This is how their different base metals are distributed, according to their 2015Q3 report.
We will switch focus to copper and zink prices in order to predict larger share price movements as we believe the base metal prices to have a larger impact on the share price than increased efficiency in operations.
The above shows the copper price for the last 26 years, according to infomine.com. And below, copper price last 12 months.
The copper price has dropped around 50% since it peaked in 2011-2012 and has dropped around 30% since its one year high. The downward trend still seem to be intact. This case now starts to look more like a put option-case than a call option case, at least in the near term. I will have to dig deeper into this.
Disclosure: I currently do not own any Lundin Mining shares nor options. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. This article should not be regarded as a buy or sell recommendation or investment advice in any way.