Intermediate Trade: Freeport-McMoRan

The Trade: Buy 1 (FCX) August 12 call and sell 1 FCX August 1 call for a 1.15 point debit, or better.   Freeport-McMoRan is a natural resources company that acquires, explores and develops mineral assets such as copper, gold, silver and molybdenum. In addition, FCX explores for natural gas and oil.   Fundamentally, FCX is returning to better days, as analysts project positive earning per share for 2017. So FCX is trading at a forward price-to-earnings ratio of 13x based on those projections. But the stock is up less that 1% for 2017, as the first quarter for this year is coming to a close on Friday.   Note that copper is up over 8% so far this year, while gold has gained a similar percentage as has copper. Oil and natural gas have not faired well, as oil is down about 2% and natural gas has fallen over 28%.   Technically, I read FCX's one year stochastic and Relative Strength Index patterns as mixed. The stochastic I read as slightly bullish, but the RSI is lagging the stochastic. So, FCX's fundamentals improvement will most likely precede the technicals. Given the stock's poor performance over the past several years, that expectation is not abnormal.   The trading tactic I prefer now for FCX is the bullishly biased, at-the-money vertical call spread expiring in August.   The trade is as follows: Buy 1 FCX August 12 call and sell 1 FCX August 17 call for a 1.15 point debit. The suggested target to close for a gain is a bid of $1.65 and the suggested stop loss target is a bid of $0.65. Best to scale into the position using limit orders.
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