Stocks

Unusual Options Activity In Freeport-McMoRan – Part 2

Freeport-McMoRan (NYSE: FCX) engages in the mining of mineral properties in the United States, Indonesia, Peru, and Chile. The company primarily explores for copper, gold, molybdenum, silver, and other metals, as well as oil and gas.

In January I talked about how the Smart Money was betting on FCX to the upside.

Well, the Smart Money thinks earnings, although bad will be better than expected. But more importantly, the Smart Money is expecting some type of resolution / agreement between the US and China on tariffs because I noticed some unusual options activity in the March $13 strike call options.

Price actually hit and exceeded $13 on February 20th…way before those options expired.

Yesterday, the Smart Money was at it again.  I’m sure part of it was the better than expected news out of China on Tuesday.  On Tuesday, China officials reported that their economy grew slightly faster than expected in the three months to March.  The economy expanded at 6.4% in the first quarter from a year earlier vs. the forecast of 6.3%.  In additional, factory output jumped 8.5% in March.  Nevertheless, the news was enough to send the copper prices to a 10 month high. 

To some degree, there is good correlation between FCX and copper prices. Freeport-McMoRan’s giant Grasberg copper mine in Indonesia is also the world’s largest gold mine and where there is gold there is usually copper as well.

As a result the Smart Money bought over 50,000 of the June call options with $16 strike price.

The Smart Money was already right earlier this year, if they are going to be right again, price will have to get through, not one, but two daily supply zones.

This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.

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