Shares of commodity producer Freeport-McMoRan (FCX) have been moving higher in recent sessions, and are nearly back to 52-week highs. One trader sees that trend continuing higher in the next month.
That’s based on the February 18 $46 call. With 35 days until expiration, 81,983 contracts traded against a prior open interest of 235, for a 349-fold explosion in volume on the trade. The buyer of the calls paid $2.19 to get in.
$46.10 is a 52-week high for shares, and less than 1 percent above the current price just over $45 per share. The stock has beaten the S&P 500 by 10 points in the past year, and higher inflation and commodity prices are pushing revenues and profit margins higher.
Action to take: The company recently raised its dividend payout by nearly 50 percent. While still a low starting yield at 0.7 percent, further increases could be in play as a longer-term commodity cycle plays out.
Added to the company’s current growth and valuation at 14 times forward earnings, and investors could fare well on this play in a commodity boom.
For traders, the options are an inexpensive bet on a move higher. The only real downside to the trade is how little time is left on the clock. However, traders could still likely nab double-digit gains or better in the coming weeks before the trade expires.
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 of the companies mentioned in this article.