OptionsHouse

Options Trading News

July 3, 2014  Thu 11:33 AM CT

FCX: SEE CHART GET CHAIN FIND STRATEGIES
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.
Share this article with your friends


OptionsHouse

Premium Services

Upcoming Webinar:

Using Options For Income

http://bit.ly/1nY1OKA

Jon Najarian and Adam Mesh of Options Wealth Machine discuss a detailed strategy utilizing credit spreads to generate income, and how any level of trader can use this simple trading technique.

Education & Strategy

Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

View more education articles »