Freeport-McMoRan Inc. (FCX) Traders Target Six-Year Lows

Freeport-McMoRan Inc (FCX) hasn't traded south of $15 since March 2009

Feb 11, 2015 at 10:39 AM
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Freeport-McMoRan Inc (NYSE:FCX) is following in the bearish path of the broader equities market today, off 2.9% at $18.18. In the options pits, puts are trading at two times what's typically seen at this point in the day, and are outpacing calls by a 3-to-1 margin. Drilling down, a number of speculators are targeting a move down to levels not seen since March 2009 over the next several months.

Specifically, FCX's May 15 put has received notable attention, and it appears a number of these contracts are being bought to open. By initiating the long puts, speculators expect the equity to breach $15 by the close on Friday, May 15, when the series expires. As noted, this would mark a roughly six-year low for the shares, and, as such, delta on the put is docked at negative 0.22. In other words, there is a roughly 1-in-5 chance the option will expire in the money.

Today's accelerated put activity is just more of the same for a stock that's surrendered more than 44% over the past 52 weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), FCX's 50-day put/call volume ratio of 0.73 ranks in the 91st annual percentile, meaning puts have been bought to open over calls at a near-annual-high clip in recent months.

However, FCX's bearish bandwagon is far from full. Of the 15 analysts covering the shares, nine maintain a "buy" or better rating, with not a single "sell" to be found. Additionally, the average 12-month price target of $26.61 stands at a 46% premium to current trading levels. Should Freeport-McMoRan Inc (NYSE:FCX) continue its downward trajectory, a fresh round of bearish brokerage notes could translate into additional headwinds for the shares.

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