Freeport McMoran Copper and Gold (FCX) 10/26/09 PriceWatch Alert Up To 7.62% Downside Protection

Posted: Monday, October 26, 2009 8:47 AM EDT
By: Market Intelligence Center Staff

Freeport McMoran Copper and Gold (NYSE: FCX) ended the last trading session at $81.35. So far the stock has hit a 52-week low of $15.70 and 52-week high of $84.28. Freeport McMoran stock has been showing support around 78.80 and resistance in the 85.56 range. Technical indicators for the stock are Bullish and S&P gives FCX a positive 4 STAR (out of 5) buy rating. FCX appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at a Dec '09 80 covered call (FHZ LP) for a net debit in the $75.15 area. That is also the break even stock price for this trade. This covered call has a 54 day duration, provides 7.62% downside protection and a 6.45% assigned return rate for a 43.62% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the FCX Jan '11 30 Call (OBQ AF) and selling the Dec '09 80 call (FHZ LP) for a $46.90 debit. The trade has a 54 day life and would provide 5.47% downside protection and a 6.61% assigned return rate for a 45.00% annualized return rate (for comparison purposes only). Freeport McMoran does not pay dividends at this time. [ABR-Seven Summits Research]