Why These 3 Commodity Names are Crumbling: ACH, FCX, and GLD

Aluminum Corp. of China Limited (ADR) (NYSE:ACH), Freeport-McMoRan Inc (NYSE:FCX), and SPDR Gold Trust (ETF) (NYSEARCA:GLD) are feeling the heat from overseas issues

Jul 7, 2015 at 11:21 AM
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The commodity sector is getting hit today, as anxiety builds over an emergency meeting in Greece, a looming deadline for Iran's nuclear arms deal, and the skittish state of Chinese markets. Three names trading notably lower are Aluminum Corp. of China Limited (ADR) (NYSE:ACH), Freeport-McMoRan Inc (NYSE:FCX), and SPDR Gold Trust (ETF) (NYSEARCA:GLD) -- with the former two earning a spot on the short-sale restricted list.

It's been a tough week for China-based names, and, today, ACH is off nearly 16.5% at $9.08 -- an annual low -- and is one of the leading laggards on the Big Board. The stock has now shed more than 47% since hitting a three-year high of $17.44 in late April, and is on pace to close south of its 320-day moving average for the second straight day -- something it hasn't done since mid-2014. In the options pits, short-term traders have rarely been as put-skewed toward Aluminum Corp. of China Limited as they are now. The equity's Schaeffer's put/call open interest ratio (SOIR) of 0.85 sits just 2 percentage points from a 12-month peak. Already this morning, put volume on ACH is running at 30 times the average intraday pace, with buy-to-open activity detected at the July 9 strike, as traders bet on additional losses through next Friday's close, when the contracts expire.

FCX fell to a six-year low of $16 this morning, and was last seen off 8.8% at $16.28 -- one of the biggest losers on the S&P 500 Index (SPX). Despite a brief attempt at technical redemption in late June, the stock has been a long-term laggard. Specifically, FCX has surrendered almost 59% since notching an annual high of $39.32 last July. Option traders have kept the faith, though, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 50-day call/put volume ratio of 2.52 ranks in the 73rd annual percentile. Today, calls are crossing at four times what's typically seen at this point in the day, with new positions being purchased at Freeport-McMoRan Inc's weekly 7/10 18-strike call.

Although gold is often considered a "safe haven" amid uncertain times, GLD was last seen 1.4% lower at $110.49. Longer term, the exchange-traded fund (ETF) has given back 12% since topping out at a year-to-date high of $125.58 in late January. In today's trading, overall option activity is running at two times the expected intraday rate, with puts having the edge over calls. Drilling down, it appears new long positions are being initiated at SPDR Gold Trust's weekly 7/31 109-strike put and 110.50-strike call.


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