Options Bulls Continue to Blast Bruised Freeport-McMoRan

Call buying has been red-hot on FCX in recent months

Oct 1, 2019 at 2:26 PM
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Freeport-McMoRan Inc (NYSE:FCX) stock is lower with copper prices today, last seen down 4.3% at $9.16, headed toward a fourth straight loss. Nevertheless, options traders are making a beeline toward FCX calls, betting on a big bounce for the mining shares.

With just under two hours left in today's trading, around 59,000 calls have changed hands -- double what's typically seen at this point, and three times the number of puts on the tape. The December 11 call is most active, and it looks like new positions are being purchased here for a volume-weighted average price of $0.21. If this is the case, breakeven for the call buyer is is $11.21 (strike plus premium paid).

Widening the sentiment scope shows FCX call buyers have been more active than usual in recent months. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 50-day call/put volume ratio of 5.24 ranks in the 86th annual percentile, meaning calls have been bought to open over puts at an accelerated clip.

Drilling down, peak front-month open interest is found at the October 11 call, where nearly 30,000 contracts reside. Data from the major options exchanges confirms buy-to-open activity, meaning these traders expect FCX to break out above $11 by the close on Friday, Oct. 18.

The last time Freeport-McMoRan stock traded north of $11 was in early August, with a rally off its late August low near $8.60 quickly contained just below here. Since this mid-September rejection at $11, FCX has shed more than 16%, dragging its year-to-date return to -11.2%.

fcx stock daily price chart on oct 1


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