Copper producer Freeport-McMoRan (FCX), is up 9% over the past year, slightly lagging the overall market. One trader sees shares trending higher into the autumn.
That’s based on the October 18 $55 calls. With 86 days until expiration, 5,020 contracts traded compared to a prior open interest of 182, for a 28-fold rise in volume on the trade. The buyer of the calls paid $0.82 to make the bullish bet.
Freeport shares recently traded for about $46, so they would need to rise by $9, or nearly 20%, for the option to move in-the-money. The strike price is right near the stock’s 52-week high of $55.24.
Freeport has had a mixed year, with earnings off by 30%, even as revenues rose by 17%. Copper prices have held up over the last year amid increased spending on construction and infrastructure projects, a trend that looks likely to continue.
Action to take: Freeport shares look attractive here after a recent sharp pullback. At current prices, shares also pay a 1.3% dividend. Investors may want to build a partial stake now, and take advantage in the volatility of commodity stocks to add to that position during future pullbacks.
For traders, the October $55 calls are aggressive, but inexpensive enough to see high-double-digit returns, or even into the triple-digit if copper stocks soar in the coming months.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.