DailyPlay – Opening Trade (FCX) – August 22, 2023

FCX Bullish Opening Trade Signal

View FCX Trade

Strategy Details

Strategy: Long Call Vertical Spread

Direction: Bullish

Details: Buy to Open 8 Contracts Oct 20th $38/$45 Call Vertical Spreads @ $2.32 Debit per contract.

Total Risk: This trade has a max risk of $1,856 (8 Contracts x $232) based on a hypothetical $100,000 portfolio risking 2%. We suggest using 2% of your portfolio value and divide it by $232 to select the # shares for your portfolio.

Counter Trend Signal: This stock is bearish and is expected to bounce higher off a level of support.

1M/6M Trends: Bearish/Bearish

Technical Score: 4/10

OptionsPlay Score: 112

Stop Loss: @ $1.15 Credit (50% loss).

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that whenever there is a multi-leg option strategy, it should be entered as a single trade. 

Please note that these prices are based on Monday’s closing prices. Should the underlying move significantly during the pre-market hours, we will likely adjust the strikes and prices to reflect a more accurate trade entry. 

Investment Rationale

As contagion out of China continues to cause fear in the markets, markets have retreated and trading in a sideways price action. In my opinion, it is too late to press new bearish shorts right now and establishing long positions have elevated risks of further news out of China that could sour sentiment further. I believe now is a good opportunity to take some exposure off of the table with our UPS position reaching within 1% of our downside target of $166. Let’s close out of full positions on UPS at the open today. To establish a new position at the moment, I prefer to stay in asset classes that are less correlated to equities.

During Monday’s Macro Outlook session and our Weekly Research, I mentioned that Gold has reached a support level and had bounce potential. One idea is that I want to establish a small long position in the miners. Both Gold and Copper have reached support levels recently and I believe FCX is a potential way to play for a bounce in these metals. I’m looking to buy the Oct $38/45 Call Vertical @ $2.32 Debit. With a hypothetical portfolio of $100,000 I recommend adding another 2% of risk on this trade, which is 8 Contracts for an additional risk of $1,856. We will set a stop loss at 50% of the premium paid at $1.15 Credit.

FCX – Daily