Call Volume Picks Up as Freeport-McMoRan Inc (FCX) Swings Higher

Freeport-McMoRan Inc (NYSE:FCX) may be overbought, but the mining stock has erased earlier losses to trade higher

Nov 25, 2016 at 11:26 AM
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Shares of Freeport-McMoRan Inc (NYSE:FCX) were down as much as 2.4% earlier, following news that Carl Icahn had reduced his stake in the mining stock to 7.2% from 8.8%. And while the stock has since erased these losses, a near-term pullback isn't out of the question, considering FCX is one of the most overbought stocks on the S&P 500 Index (SPX). Nevertheless, FCX shares were last seen up 0.1% at $16.21, and options traders are eyeing even more gains through today's shortened trading session.

Specifically, FCX call volume is running at 1.5 times what's typically seen at this point in the day. By the numbers, around 28,000 calls have changed hands, compared to roughly 12,000 puts. Most active is the security's weekly 11/25 16-strike call, where it looks like new positions are being purchased. If this is the case, the goal is for FCX to settle north of $16 at 1 p.m. ET today -- when U.S. stock markets close.

Widening the sentiment scope reveals it's been put buyers who have been more active than usual in FCX's options pits. at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day put/call volume ratio of 0.93 ranks higher than 75% of all comparable readings taken in the past year.

And while some of this recent put buying is likely a result of shareholders hedging against any downside, considering shares of Freeport-McMoRan Inc (NYSE:FCX) have more than doubled year-to-date, skepticism is seen outside of the options pits, too. Specifically, short interest accounts for 10% of the stock's float, while almost 79% of analysts maintain a "hold" or worse rating. Should the shares resume their quest for annual highs -- FCX topped out at a 12-month peak of $16.42 on Wednesday -- a round of short-covering or upgrades could help the shares continue to shake off their overbought status.

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