Options Bulls Blast Freeport-McMoRan as Stock Scales New Highs

BMO lifted its price target on the soaring mining stock

Dec 18, 2017 at 2:40 PM
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BMO boosted its price target on Freeport-McMoRan Inc (NYSE:FCX) to $18 from $17, sending the shares up 2.7% to trade at $17.44 -- and earlier to a two-year high of $17.46 -- bringing their year-to-date gain to 32.2%. Optimism toward the surging mining stock appears to be growing in the options pits, too, with calls trading at two times the average intraday pace this afternoon, and one trader raising the stakes on their bullish bet.

By the numbers, 69,390 calls have changed hands so far, with volume pacing in the 95th annual percentile. The January 2018 15-strike call is most active with 11,292 contracts traded, and it looks like new positions are being purchased here. The weekly 1/12 16.50- and 17.50-strike calls are also being targeted, with Trade-Alert suggesting one speculator is rolling the lower-strike calls up to the higher strike to bet on bigger FCX gains into the new year.

Today's heavy call trading just echoes the broader trend seen in FCX's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 90,103 calls have been bought to open in the past two weeks, compared to 15,272 puts. The resultant call/put volume ratio of 5.90 ranks in the 97th annual percentile.

And it certainly looks like an attractive time to bet on FCX's short-term trajectory with options, considering the stock's Schaeffer's Volatility Index (SVI) of 36% ranks in the 13th percentile of its annual range. In other words, muted volatility expectations are being priced into near-term contracts.

Another round of upbeat analyst notes could certainly keep the wind at the stock's back, too, and help speculators profit on their investment in FCX call options. Of the 15 brokerages covering Freeport-McMoRan shares, 11 maintain a "hold" or worse rating, while the average 12-month price target of $16.56 stands at a discount to current trading levels.


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