The S&P 500 index was driven higher on Tuesday on news of two international mining companies considering the purchase of the Pittsburgh-based aluminum producer, Alcoa, for over 40 billion.Rising with this tide was fellow mining company, Freeport-McMoRan Copper & Gold Inc. ( FCX). The stock price has risen over 5% this week on sustained higher volume.
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Merger Talks: The company announced on February 2nd it would be holding a special meeting of stockholders on March 14, 2007 to vote on a proposed acquisition of the Phelps Dodge Corp.(PD).
Back in November, Freeport-McMoRan made public the news of their intention to buy Phelps Dodge for approximately $26 billion in cash and stock. This merger will create the world’s largest copper company traded publicly. If approved by shareholders the merger deal is still subject to regulatory approval.
Sales growth outpaced the industry by nearly 4% and the company’s net profit margin is over 28% while the industry’s trails at a respectable 8%. Many also feel the stock, with a current P/E of 8.50, is undervalued.
Competitors:
Competitors for FCX include: Newmont Mining Corp. (NEM), Southern Copper Corp. (PCU), and Corporación Nacional del Cobre de Chile (private).
Potential Trades:
All of the following option trades have 33 days until expiration. Freeport-McMoran is currently trading at $57.84. These trades were discovered using the powerful suite of option search tools found at PowerOptions.
| Covered Call – Freeport-McMoran Inc. (FCX) $ 57.84 (29) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| OPTION | Strike Info |
Opt Bid |
% Dnsd. Prot. |
% If Unch. |
% If Asgnd |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FCXCL | 07 MAR 60.00 | $1.85 | 3.20% | 3.30% | 7.20% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Bull-Call Debit Spread — Freeport-McMoran Inc. (FCX) $ 57.84 (29) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Sell Opt |
Strike Info |
Bid Price |
Buy Option |
Strike Info |
Ask Price |
% Return |
Break Even |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| FCXCK | 07 MAR $55.00 | $4.30 | FCXCI | 07 MAR $45.00 | $13.20 | 12.40% | $53.90 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
The covered call trade, an out of the money covered call, offers 3.2% downside protection and a potential profit of 3.3% if the stock remains unchanged. If the stock rises above the option’s $60.00 strike price, the potential profit becomes 7.2%. The net cost of this trade, per 100 options, is $5,599.00.
The second trade is a bull call debit spread. This trade offers 12.4% potential profit if the stock remains above $55.00. If the stock decreases below the break-even price of $53.90, the investment begins to lose money. If the stock price goes below the lower strike price of $45.00, the entire investment is lost. The net cost of this trade, per 100 options, is $890.00.
For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.
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[tags]S&P 500, Corporación Nacional del Cobre de Chile, FCX, Freeport-McMoran Copper & Gold Inc., NEM, Newmount Mining Corp., PCU, Southern Peru Copper Corp., PD, Phelps Dodge Corp., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options[/tags]