Stocks quoted in this article:
Option Brief: Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) bucked the broad-market trend lower yesterday to finish the session with a 3.4% lead, thanks to a favorable mention at Goldman Sachs. In the stock's options pits, overall activity jumped to more than three times what's typically seen, and based on the equity's 30-day at-the-money implied volatility (IV) -- which rose 7.7% to 19.6% -- short-term contracts were in high demand.
Call players targeted the weekly 6/27 36 strike, where 5,388 contracts changed hands. The majority of these went off at the ask price, IV surged 5.3 percentage points, and open interest rose overnight -- collectively inferring buy-to-open activity. FCX closed at $36.04 last night, and according to the options market, there is a roughly 50-50 chance the position will be in the money (ITM) at this Friday's close, when the options expire. Specifically, delta on the call is 0.52.
Elsewhere, option bears honed in on FCX's July 35 put, which saw a number of new positions created overnight. Considering the majority of these contracts traded at the ask price yesterday, and IV edged north, it seems safe to assume that the fresh initiations were of the bearish variety. Delta on this out-of-the-money put was docked at negative 0.34 at yesterday's close, suggesting a roughly 1-in-3 chance of an ITM finish at the close on Friday, July 18, when front-month options expire. Regardless of where Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) lands, the good news for short-term traders is premium on the equity's near-term options is currently priced at a relative bargain.