Options Trading News

July 3, 2014  Thu 11:33 AM CT

Can anything stop Freeport-McMoRan Copper & Gold?

The metals and energy producer has been running hard since it was cited on the June 20 installment of our Market Action webinar. There was also bullish option activity yesterday, and those trades are already up more than 40 percent.

Today's trading is bullish again, with optionMONSTER's Heat Seeker showing especially heavy call volume. The biggest transaction consisted of a roll from the July 36 calls, which were sold for $2.24 to $2.49, into the July 39 calls, purchased for $0.32 to $0.38. About 6,800 contracts traded in each strike.

Long calls lock in the price where investors can get long a stock, providing cheap leverage to a rally. Today's investor probably bought the 36s when FCX was lower and is now sitting on a nice profit. Adjusting to the higher strike let him or her recover about $1.96 while staying positioned to profit from further stock gains. The September 40 calls were also bought for $0.83 to $0.95. (See our Education section)

FCX is up 1.93 percent to $38.56 in afternoon trading and has been the best-performing materials stock in the S&P 500 since it was mentioned on Market Action. It's been waking up along with other metals producers such as U.S. Steel and AK Steel.

Investors have returned to the sector after neglecting it for years. They're responding to strong economic numbers in the U.S. and China, and appear to be rotating out of high-flying energy stocks. Coal miners have also been coming back to life, according to our researchLAB market-analysis tool.

Total option volume in FCX is almost triple its full-session average in this holiday-shortened session, with calls outnumbering puts by a bullish 50-to-1 ratio.

Disclosure: I own FCX shares.
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