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Option Bears Take a Shine to Freeport-McMoRan Copper & Gold Inc. (FCX)

Freeport-McMoRan Copper & Gold Inc. traders picked up May-dated puts

by 3/20/2014 10:15 AM
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Option Brief: Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) finished Wednesday in the red, despite a top company executive's optimistic outlook on China's copper demand. The shares -- last seen 1.5% lower at $30.60 -- are now down more than 18.8% in 2014, and options traders yesterday gambled on more downside in the short term.

By the close, FCX had seen roughly 30,000 puts cross the tape, representing a 71% mark-up to its average daily volume. Most active was the May 32 put, where nearly 8,100 contracts traded, including a block of 5,283 contracts that crossed at the ask price of $1.87. Plus, open interest at the strike swelled by more than 6,500 contracts overnight, pointing to newly bought bearish bets.

The buyer of that block will make money if FCX is sitting south of $30.13 (strike price minus premium paid) -- in year-to-date low territory -- at the close on Friday, May 16, when the options expire. The equity's Schaeffer's Volatility Index (SVI) of 29% sits in the 38th percentile of its annual range, implying that Freeport-McMoRan Copper & Gold Inc.'s (NYSE:FCX) short-term options are on the inexpensive side right now, historically speaking -- good news for the aforementioned put buyer, since the most they're risking is the initial premium paid.


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