Can the Surging Price of Gold Boost Freeport-McMoRan?
By:Tom Preston
With the bloom coming off the electric vehicle rose, copper—a key EV component—has been flat this year. That’s bad news for Freeport-McMoRan (FCX), one of the world’s largest copper producers.
The company’s stock is down over 10.4% in 2024, drastically underperforming the broader market. However, FCX is also a major producer of gold, and gold has surged to its all-time high. That could help FCX’s bottom line during its next earnings call in late April.
FCX’s out of the money (OTM) calls are trading over equidistant OTM puts, indicating the market sees risk to the upside. That might be enough for a contrarian trader to consider a bullish strategy.
FCX’s implied volatility (IV) has been rising on the stock’s decline, and with a 42% overall IV and 31% IV rank, FCX’s options are good candidates for short premium trades.
If you think FCX might rally in the next few weeks ahead of earnings, the short 35 put in the April weekly expiration with 36 DTE (days to expiration) is a bullish strategy that has a 91% probability of making 50% of its max potential profit before expiry, and that generates $1.74 of positive daily theta.
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Tom Preston, tastylive chief market strategist, is responsible for the brokerge’s trading strategy, client-facing trading software and futures trading products. He contributes to Luckbox magazine and writes tastylive's Cherry Bomb newsletter. He's been trading options since 1992.
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