Freeport-McMoRan yielded big gains on bullish option positions this morning before pulling back later in the session.
Last Thursday, Investitute’s proprietary programs showed that 9,500 Weekly $14 calls expiring on Oct. 13 were purchased for $0.44 to $0.48 with shares at $13.75. These were clearly new positions, as open interest in the strike was a mere 96 contracts before the activity appeared.
Those calls traded up to $0.93 right after the opening bell today, more than double their original price. The stock was up 6.5 percent in the same time frame, illustrating the type of leverage that can be obtained with options. Investitute co-founder Pete Najarian cited the activity in choosing Freeport-McMoRan as his final trade Monday on CNBC’s “Halftime Report.”
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 reached a session high of $14.68 early in the morning but ended the session down 2.07 percent to $14.18. The mining and energy company rebounded with a rising price of copper in the last week, but shares fell this afternoon when the dollar spiked higher on moves by the Federal Reserve.