Price Forecast:

Bullish Case: BHP's investments in copper and green initiatives are expected to drive sustained demand, potentially pushing stock prices higher. Implied volatility spikes suggest market anticipation of positive future developments in mining operations and legal settlements.

Bearish Case: Legal challenges from the Mariana dam disaster could undermine BHP’s stock stability, with substantial financial impacts anticipated. Current backwardation suggests potential for declining prices in a bearish environment if demand falters.

Potential Outcomes:

• 30% chance of recovery to $58 driven by increased demand.
• 40% likelihood of sideways trading between $52 and $55 due to legal uncertainties.
• 30% chance of a dip to $50 amid ongoing litigation risks.

Trading Oracle: Implement a bullish debit spread strategy: buy $55 calls and sell $57.50 calls expiring in 30 days. This captures potential upside from institutional buying while limiting risk amid volatility. Adjust positions based on legal developments around BHP's liabilities.

December 13, 2024