When John identifies a strategic exit point, he will send you an alert with specific trade information as to what security to sell, when to sell it, and at what price. Most often, it will be to TAKE PROFITS, but, on rare occasions, it will be to exercise a STOP LOSS at a predetermined price to adhere to strict risk management discipline.
Trade Alert - (FCX) – STOP LOSS
SELL the Freeport McMoRan (FCX) May 2022 $37-$40 vertical BULL CALL spread at $1.95 or best
Opening Trade
4-25-2022
expiration date: May 20, 2022
Portfolio weighting: 10%
Number of Contracts = 40 contracts
Recession fears have greatly accelerated over the last four days, taking bonds up, and economically sensitive plays like Home Depot (HD), Caterpillar (CAT), JP Morgan (JPM), and Freeport McMoRan (FCX) down. Freeport alone has cratered an astonishing 22% in just the last three trading days.
Therefore, I am selling the Freeport McMoRan (FCX) May $37-$40 vertical BULL CALL spread at $1.95 or best.
Freeport McMoRan reported Net income that more than doubled to an eye-popping $1.53 billion, or $1.04 a share, from $718 million, or 48 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share of $1.07 beating the FactSet consensus of 94 cents.
Revenue grew 36.1% to $6.60 billion, above the FactSet consensus of $6.44 billion, as copper sales rose 24.1% to 1.02 billion recoverable pounds and as gold sales increased 58.5% to 409,000 recoverable ounces.
Average realized price per pound of copper rose 18.2% to $4.66 and the realized price per ounce of gold increased 12.1% to $1,920. The company cut its copper sales outlook for the second quarter to 1.040 billion pounds from 1.075 billion pounds, for the third quarter to 1.095 billion pounds from 1.125 billion pounds and for the fourth quarter to 1.095 billion pounds from 1.130 billion pounds.
This was a bet that (FCX) will not rise fall below $40.00 by the May 20 options expiration in 21 trading days.
Here are the specific trades you need to execute this position:
Sell 40 May 2022 (FCX) $37 calls at………….....……….………$4.30
Buy to cover short 40 May 2022 (FCX) $40 calls at…………$2.35
Net Proceeds:………………………........….………..………….….....$1.95
Loss: $2.50 - $1.95 = -$0.55
(40 X 100 X -$0.55) = $2,200 or -22.00%.
If you are uncertain about how to execute an options spread, please watch my training video by clicking here.
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.
Keep in mind that these are ballpark prices at best. After the alerts go out, prices can be all over the map.
