OTCPK:CPPMF - Post by User
Comment by
Rational43on Apr 26, 2021 1:47pm
100 Views
Post# 33067646
RE:Puts are not a hedge .. insurance
RE:Puts are not a hedge .. insurance Agreed, they purchased cheap puts which were well "out of the money" as crash insurance, which the Toronto analyst community, always ready for a commodity price crash, will love.
They bought when copper was about $4.20, which means they didn't pay very much for them. If tey would have bought "at the money" puts at $4.20, it probably would have cost 8-15 cents/lb, more for the out months.
So even in locking in disaster insurance they were "bullish", only paying a small premium for a very unlikely copper price crash.
Let's say (in a Toronto analysts head) copper goes to $4.50, than in Q4 {when the imaginary new wall of supply shows up} copper crashes back to $3.50....CMMC gets the full $4.50 copper price all year, until copper drops below $3.75, then they get that on their hedged amounts.
Very smart for dealing with Bay Street, who are always much more bearish than the commodity futures strip.