Option Traders Switch Sides Amid Freeport-McMoRan Inc. (FCX) Surge

Freeport-McMoRan Inc (FCX) calls are trading at nearly seven times the average intraday pace

Mar 20, 2015 at 1:48 PM
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Freeport-McMoRan Inc (NYSE:FCX) is flying high today -- up 8.4% at $18.72 -- amid a resurgence in gold and copper prices, the latter of which is a result of FCX's production halt at its Grasberg mine in Indonesia. Today's pop is being well-received in the equity's options pits, with calls trading at nearly seven times what's typically seen at this point in the day, and outpacing puts by a roughly 3-to-1 ratio.

Drilling down, the stock's May 23 and 25 calls are most active, due to two huge blocks that appear to be part of a larger spread. Meanwhile, more clear-cut activity is occurring at FCX's May 21 call. It seems as if new long positions are being established here -- a theory reiterated by Trade-Alert -- as speculators gamble on FCX toppling $21 by the close on Friday, May 15, when the options expire. Amid today's rally, delta on the call has jumped to 0.28 from 0.15 at last night's close, signaling an increased probability of an in-the-money finish.

Broadening the sentiment scope, today's call-skewed session runs counter to the withstanding trend seen in FCX's options arena. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day put/call volume ratio of 1.07 rests at a 52-week peak. Additionally, the equity's Schaeffer's put/call open interest ratio (SOIR) of 1.49 ranks in the 94th annual percentile, meaning short-term speculators have rarely been as put-heavy as they are now.

This skepticism hasn't spilled outside of the options pits, though, despite the fact that Freeport-McMoRan Inc (NYSE:FCX) was staring at a more than 44% year-over-year deficit heading into today's session. Of the 15 analysts covering the shares, nine maintain a "buy" or better rating, with not a single "sell" to be found. Meanwhile, although it appears opinions are beginning to shift, the stock's average 12-month price target of $25.53 stands at a 36% premium to current trading levels.

 

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