FCX Stock Sinks on Lowered Treatment Charges for 2020

Options bulls are predicting more upside for the mining stock, however.

Deputy Editor
Nov 21, 2019 at 11:37 AM
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The shares of mining concern Freeport-McMoRan Inc (NYSE:FCX) are inching lower this afternoon, on the heels of the company announcing it is setting lower treatment charges for 2020. FCX and three Chinese copper smelters are planning on a 23% cut in annual treatment and refining charges next year, which will push the industry benchmark back to a nine-year low. The stock is down 1.3% to trade at $10.90, at last check. 

Despite the dip, options traders are picking up calls on FCX. So far, 19,000 calls have exchanged hands, compared to 3,167 puts. Quite a bit of buying action is being detected at the February 12 call, followed by the May 13 call, where contracts are being bought to open for a volume weighted target price of $0.62. This means these traders are expecting FCX to rally back north of $13.62 (strike plus premium paid) -- a region the security hasn't touched since its late-April peak -- by the time these contracts expire on May, 15, 2020. 

Echoing this, bullish bets have been the norm for options traders, with 3.7 calls bought for every put during the last 10 days on the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). In other words, calls have been purchased at a quicker-than-usual clip over puts of late.

In recent weeks FCX has been coasting into the $11 region, following its rally off early-October lows, and in spite of recent pressure at the 320-day moving average. The stock is still managing to keep its head above its year-to-date breakeven mark, though, and is testing its footing back atop its 20-day moving average -- a trendline that has caught several pullbacks during the last few months. 

FCX Nov 21



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