Freeport-McMoRan Inc. (FCX) Bounce Sparks a Rush of Bullish Betting

Freeport-McMoRan Inc's (FCX) February 20 call is being bought to open today

Jan 16, 2015 at 2:23 PM
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It's been a volatile week of trading for Freeport-McMoRan Inc (NYSE:FCX). On Wednesday, the shares plunged nearly 11% amid a sharp drop in copper, and this afternoon, the equity is up 4.1% to trade at $19.09. Although FCX's 14-day Relative Strength Index (RSI) of 24 suggests a near-term bounce may have been in the cards, today's gains aren't enough to sate options traders, who are calling for a move north of the round-number $20 mark over the next five weeks.

30-Minute Chart of FCX Since Monday, Jan 12

Taking a quick step back, calls are trading at 1.7 times what's typically seen at this point in the day, with a healthy portion of the day's action centered on the February 20 strike. All signs point to buy-to-open activity, as traders bet on the stock to be sitting north of $20 at the close on Friday, Feb. 20, which is when the options expire.

With FCX's fourth-quarter earnings report tentatively slated for release at the end of this month, these short-term speculators are willing to pay up for their bullish bets. Not only does the equity's Schaeffer's Volatility Index (SVI) of 55% rank in the 96th annual percentile, but its 30-day at-the-money implied volatility of 54.3% stands above 99% of similar readings taken in the past year, and earlier touched a 12-month high of 57.5%.

Outside of the options pits, optimism is high toward the long-term laggard. Of the 15 analysts covering the shares, 12 have doled out a "buy" or "strong buy" recommendation, with not a single "sell" to be found. Plus, the consensus 12-month price target of $32.31 stands at a 69% premium to the stock's current perch. Should Freeport-McMoRan Inc (NYSE:FCX) resume its withstanding trajectory -- the shares have shed more than half their value since hitting an annual high of $39.32 on July 10 -- a round of downgrades and/or price-target cuts could translate into a fresh wave of selling pressure.

 

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