Freeport-McMoRan Stock Call Options Hot as Copper Futures Rise

Solid GDP data out of China is giving mining stocks a boost today

Jul 17, 2017 at 2:39 PM
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Shares of Freeport-McMoRan Inc (NYSE:FCX) are rising in step with copper futures today, on China's better-than-expected gross domestic product (GDP) data. At last check, FCX stock was trading up 3.8% at $13.08, and above several key technical levels. FCX options traders are getting in on the action, with more than 84,400 contracts traded -- nearly three times the expected intraday amount.

Most of the options trading has occurred on the call side, with about 60,000 calls and 25,000 puts on the tape. In fact, call volume is on track to settle in the 93rd annual percentile. The July 13.50 call has attracted the bulk of the attention, and it looks like there's a mix of buy- and sell-to-open activity occurring here.

Those initiating new long positions are expected FCX to rally north of $13.50 by Friday's close, when the front-month options expire. Conversely, those selling to open the calls are betting on the strike to serve as a short-term ceiling. Earlier, the shares topped out at an intraday peak of $13.36.

More broadly, FCX options traders have been buying to open puts over calls at a faster-than-usual clip. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 34,732 long puts have been initiated in the last 10 days, compared to 24,344 calls. The resultant put/call volume ratio of 1.43 ranks 8 percentage points from a 52-week peak.

Drilling down, the mining stock's July 12 put has seen the biggest rise in open interest over this time frame, with 15,701 contracts added. Data from the major options exchanges confirms a significant amount of these puts were bought to open, suggesting options traders are bracing for a near-term move below $12.

And while FCX stock was trading south of $12 one week ago, it has since moved higher and is trying to regain a foothold north of $13 -- home to its 120-day and 200-day moving averages. Additionally, the $12-$13 region holds some significance on Freeport-McMoRan's charts, coinciding 23.6% Fibonacci retracement of the stock's slide off its 2014 high near $39 to its 2016 low around $3.50, as well as a late-2016 bull gap.

fcx stock daily price chart july 17


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