Follow Up to Trade Alert - (FCX) April 15, 2015

As a potentially profitable opportunity presents itself, John will send you an alert with specific trade information as to what should be bought, when to buy it, and at what price. This is your chance to ?look over? John Thomas? shoulder as he gives you unparalleled insight on major world financial trends BEFORE they happen.

Follow Up to Trade Alert - (FCX) - UPDATE

Buy the Freeport McMoRan (FCX) May, 2015 $16-$17 deep in-the-money vertical call spread at $0.80 or best

Opening Trade

4-15-2015

expiration date: May 15, 2015

Portfolio weighting: 10%

Number of Contracts = 125

 

If Chinese and Hong Kong stocks have suddenly caught fire, then it can only mean one thing. The Chinese economy is recovering and price of copper is about to rise, and so are the shares of the world?s largest copper producer, Freeport McMoRan (FCX)

You can buy this vertical bull call spread anywhere within a $0.75-$0.90 range and have a reasonable expectation of making money on this trade by the May 15 expiration.

The spreads on these deep-in-the-money options are wide, so don?t hold me to these prices. The low stock price also brings a large number of contracts to do the trade, so you?ll have to pay more than the usual amount of commission.

If you can?t do options, then buy the (FCX) stock outright. There could be another 15%-25% in it this year.

You can also participate through buying the First Trist ISE Global Copper ETF (CU). Its three largest holdings are First Quantum Minerals Ltd. (FM.TO), Antofagasta (ANTO.L), and Freeport McMoRan (FCX). For more information about (CU), please click here at http://www.ftportfolios.com/retail/etf/etfsummary.aspx?Ticker=CU .

No one has been singing louder the praises of the predictive power of copper prices (CU) louder than me this week.

They call the red metal ?Dr. Copper? because of its uncanny ability to forecast the future direction of the global economy.

Look at the charts below and it is clear that the eminent professor has been crying ?watch out above? since mid March. Ditto for top copper producer, Freeport McMoRan (FCX).

So it is with the greatest interest that I picked up some comments this morning from my old friend, (FCX) CEO, Dan Adkerson. He believes that the weakness in copper earlier this year is not the beginning of a new bear market, but merely short term profit taking driven by speculators.

The Chinese economic slowdown has been a drag, which accounts for 40% of global demand. It?s clear that the crash in crude last year has also created some spill over selling in other hard assets.

However, Adkerson argues that the long-term case for copper is still compelling. The Chinese drive for a higher standard of living is irresistible, and that requires enormous amounts of copper for roads, construction and shipbuilding.

A burgeoning global hybrid and electric car industry is also increasing demand for copper.

Adkerson?s big challenge is how to meet all this demand. The enormous capital requirements and long lead times essential for the opening of new mines means that his company must think not in terms of weeks, months or even years, but in decades.

He has no problem making those commitments. (FCX) already produces 4 million pounds of copper per year. With a current production cost of $1 per pound, it can easily handle the recent decline from $2.90 to $2.72.

There is no doubt that copper led the charge to the downside last year. But when it runs its course, copper and (FCX) are going to be some of the first positions that I step back into.

The best execution can be had by placing your bid for the entire spread in the middle market and waiting for the market to come to you. The difference between the bid and the offer on these deep in-the-money spread trades can be enormous.

Don?t execute the legs individually or you will end up losing much of your profit. Spread pricing can be very volatile on expiration months farther out.

If the price of this spread has moved more than 5% by the time you receive this Trade Alert, don?t chase it. Wait for the next one. There are plenty of fish in the sea.

Here are the specific trades you need to execute this position:

Buy 125 May, 2015 (FCX) $16 calls at?????$2.81

Sell short 125 May, 2015 (FCX) $17 calls at..??.$2.01
Net Cost:??????????????????.....$0.80

Potential Profit: $1.00 - $0.80 = $0.20

(125 X 100 X $0.20) = $2,500 or 2.50% profit for the notional $100,000 portfolio.