Freeport McMoran Copper and Gold (FCX) 11/13/09 PriceWatch Alert With $73.91 Break Even

Posted: Friday, November 13, 2009 8:31 AM EDT
By: Market Intelligence Center Staff

Freeport McMoran Copper and Gold (NYSE: FCX) closed yesterday at $81.16. So far the stock has hit a 52-week low of $15.70 and 52-week high of $84.70. Freeport McMoran stock has been showing support around 78.96 and resistance in the 84.46 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 Jan '10 80 covered call (FHZ AP) for a net debit in the $73.91 area. That is also the break even stock price for this trade. This covered call has a 64 day duration, provides 8.93% downside protection and an 8.24% assigned return rate for a 46.99% 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 35 Call (OBQ AG) and selling the Jan '10 80 call (FHZ AP) for a $40.25 debit. The trade has a 64 day life and would provide 7.28% downside protection and an 11.80% assigned return rate for a 67.00% annualized return rate (for comparison purposes only). Freeport McMoran does not pay dividends at this time. [FBB-Seven Summits Research]