Unusual Options Activity: Freeport McMoRan (FCX)

Big bet that copper mining giant will move at least 10 percent higher by early July.

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  • At least one trader is betting on a 10 percent pop in Freeport McMoRan (FCX) in the next month.

    On Thursday, nearly 5,900 contracts traded on July 5th $11 calls. With shares just over $10, they would need to rally nearly $1, or about 10 percent, for these calls to expire in-the-money.

    With a prior open interest of 102 in the contract before the trade, this is a big move.

    As a copper producer, Freeport is best-in-class. However, copper prices have been weak year-to-date, amidst trade war fears.

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  • In investing circles, copper is often known as Dr. Copper. This is due to its propensity to predict a recession, as falling copper prices reflect reduced demand. Copper is used in nearly every physical industry, from wire and piping to higher-end electronics.

    Action to take: Consider a stake in Freeport. A call option with a September date and $11 strike will give you more time for a bounce in copper to play out. But shares could be an interesting long-term buy here as well. New copper supplies are failing to meet up with current demand, and a shortage is likely to develop in the next few years as this trend continues.