Bulls stick with copper bigwig: Options recap

Copper pipes of different diameter cut. 3d render.

Only a week ago, Freeport McMoRan (FCX) was the target of a large bullish options trade. Today the copper giant is seeing more of the same.

Activity hit fast and furious in FCX’s July 16 calls out of the gate this morning. Large blocks changed hands for $2.20 to $2.50, pushing volume past 23,000 contracts by early afternoon. That makes it one of the busiest equity derivatives in the entire market so far today.

Calls fix the price where a security can be purchased. That can generate leverage from a stock rallying but also expire worthless if no move, or a small drop occurs. (See our Knowledge Center.) Today’s contracts are in the money, essentially letting investors chop the bottom $16 off the shares and capture any gains on a dollar-for-dollar basis.

FCX rose 1 percent to $18.21 in afternoon trading. The company has struggled with political risk involving its key Grasberg mine in Indonesia, but it’s also benefited from a strike at Chile’s massive Escondida mine. That, in turn, spurred a sharp rally in copper futures (@HG) last week.

Overall in the name, calls outnumber puts by almost 3 to 1.

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David Russell is Global Head of Market Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.