Buy Alert: March 10, 2014

| March 10, 2014

Buy Alert: March 10, 2014

 

Option Strategy:

Buy Freeport McMoran Copper and Gold (FCX) May 16, 2014 $31.00 puts for $1.60 or better.

 

Commodity Outlook: Copper

Extremely worrisome Chinese economic data has copper on the ropes.  The red metal is testing important technical support at $3 a pound this morning.  We may see a short-term bounce from this level, but in the long run, copper will likely break into the $2 range.

Here’s a company that will not do well with lower copper prices…

 

Resource Company: Freeport McMoran Copper and Gold (FCX)

Freeport is the world’s largest publically traded copper producer.  In fact, the company produced just over 1.4 million tons of copper in 2013.  Since the company is sensitive to price fluctuations in the red metal, this is the perfect way to capitalize on additional downside.

Let’s buy the FCX May 16, 2014 $31.00 puts for $1.60 or better. 

The current bid/ask spread for this contract is $1.50/$1.53. 

Pay no more than $1.60 per contract!

Our official entry price for performance tracking is $1.53. Your price may be higher or lower.

Exit Strategy:

fcx31014

Remember, we want FCX to trade lower.  Our first profit target is the $30.00 support area.  We could see additional downside in FCX if copper falls substantially below $3 a pound in coming months.  In such a scenario, FCX may plunge to our second profit target at $28.00.

The risk control price is $33.50.  If FCX trades above that level, conservative investors should consider closing this trade to conserve capital.

 

Category: Commodity Trading