Weekend Trader Alert
August 7, 2022
Open Positions Update
- Please extend the scheduled time-stop date on the McDonald’s (MCD) November 18, 2022, 240-strike call to Monday, August 22.
- Close the Zoom Video Communications (ZM) September 16, 2022, 110-strike put on Monday, August 8. Close the position at a limit price within the range of the current market price when you place the order.
The following is this week's recommendation:
Freeport-McMoRan (FCX)Place a limit order to buy the Freeport-McMoRan (FCX) October 21, 2022 28-strike call at a limit price within range of the current market asked price when you place your order. At the close on Friday, August 5, this option was offered at $4.20. FCX closed at $30.27 on Friday, August 5.Do not attempt to enter this position after Monday's close.Please use the following guidelines to manage the position:- Exit the position if the option is at a 100% gain from your entry price.
- If the option has not reached its target profit by 3:00 p.m. Eastern time on Tuesday, September 6, close the position.
- If there is a change to the above closeout parameters, we will notify you in your regular Sunday evening communication.
Copper name Freeport-McMoRan (FCX) saw an inverted head and shoulders pattern with a bullish engulfing candle on Friday. Multiple levels of support have emerged on FCX’s chart, including the security’s 2010, 2011, and 2013 lows, as well as its 3-year moving average, which has acted as a key pivot level in the past. Plus, with the shares cracking back above the $30 support region, now looks like an ideal time to speculate on even more upside for Freeport-McMoRan stock. This level has been key, as FCX has been trying to close above the 30-strike put wall that’s been acting as pressure in recent sessions. A hold above here could also target call strikes overhead.
Even better, the stock sports a 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) that sits higher than 84% of readings from the past 12 months. This is significant because FCX put buyers have surged prior to every counter-trend rally this year, and it looks like this is happening once more.
Meanwhile, a round of upgrades could put additional wind at the equity’s back. Of the 14 analysts in coverage seven say “buy” or better, compared to seven “hold” or worse ratings.
It’s also worth noting that a move back up to the recently resistant $36 level in the underlying stock would cause our recommended October 28 call to double. In other words, a 20.3% pop in shares will produce the desired effect. Lastly, our recommended call has a leverage ratio of 4.8.
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