Freeport-McMoRan has been a favorite options pick for months, and traders keep racking up big gains in the name.
On Dec. 20, Investitute’s tracking systems detected the purchase of 5,000 February $19 calls for $0.55 as part of a bullish roll with shares at $17.56. Volume was far above the strike’s open interest of 1,829 contracts, showing that this was a new position.
Those calls traded for $1.74 yesterday, more than 3 times their purchase price. The stock rose 14.5 percent in the same time period, underscoring the kind of leverage that can be obtained with options. Investitute co-founder Pete Najarian cited even more buying in Freeport’s February $22 calls on CNBC’s “Halftime Report” yesterday.
Long calls lock in the price where a stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.
FCX was up 2.89 percent to $19.96 yesterday. The mining and energy company has rallied for months with the strength in copper and the rebound in oil.