Entered Lundin Mining put option

Before I continued with my research on the copper and zinc price, I took a small position in the put option LUMI6O20 earlier today. This means Lundin Mining is underlying and it matures in 2016, March 18th with an exercise price of 20 SEK. I paid 1,50 SEK per underlying share.

Lunding Mining put option transaction

Below picture shows the underlying share’s 5-day chart and where and when the trade took place.

LUMI execution

And below, roughly 3 month chart with copper price (candles) and Lundin Mining Canadian share price (red line). By the way, it’s a wonderful chart tool they have at www.tradingview.com. I just happened to stumble upon it and I believe I will have to explore it further.

LUMI and copper

Well, we will see how this turns out in time. This time, I went maybe a little too much with my gut feeling, but it becomes so much easier and entertaining to follow when you have a stake in it. I’m after all still exploring these opportunities for my own educational purposes. And this is what the option was trading at by the time the market closed.

LUMI option end first day

Lundin Mining option case

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.

LUMI options

Let’s take a look at the stock.

LUMI 5y

On this five year graph we can see how the stock is down to its 5 year lows.

LUMI 1y

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.LUMI Distribution

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.

Copper 26y

The above shows the copper price for the last 26 years, according to infomine.com. And below, copper price last 12 months.

Copper 1y

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.