Jacquie's Post Trade Alert - (FCX) June 9, 2023

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) – BUY

BUY the Freeport McMoRan (FCX) June 2024 $35-$38 -at-the-money vertical Bull Call spread LEAPS at $1.50 or best

Opening Trade

6-9-2023

expiration date: June 21, 2024

Number of Contracts = 1 contract

If you are looking for a cheap lottery ticket, then here is a lottery ticket.

While the chance of winning a real lottery is something like a million to one, this one is more like 10:1 in your favor. And the payoff is 2:1. That is the probability that Freeport McMoRan (FCX) shares will rise by 8% or more over the next 12 months.

You may not have noticed, but we have just entered the golden age of the electric vehicle, thanks to climate change and massive government support. Each EV will need 200 pounds of copper, and Freeport McMoRan is the world's largest copper producer. It also is the world’s largest producer of molybdenum and owns some of the biggest gold mines.

The company’s output will have to increase by at least 500% over the next eight years to accommodate projected copper demand. (FCX) has also been especially accommodating in that its shares are just coming back from a 52% over the last 12 months.

To learn more about the company (and to order a car), please visit their website at https://www.fcx.com

I am therefore buying the Freeport McMoRan (FCX) June 2024 $35-$38 out-of-the-money vertical Bull Call spread LEAPS at $1.50 or best.

Don’t pay more than $2.00 or you’ll be chasing on a risk/reward basis.

If you want to get more aggressive with more leverage, use a pair of strike prices higher up. This will give you a larger number of contracts at a lower price.

Please note that these options are illiquid, and it may take some work to get in or out. Start at my price and work your way up until you get done. Executing these trades is more an art than a science.

Let’s say the Freeport McMoRan (FCX) June 2024 $35-$38 out-of-the-money vertical Bull Call spread LEAPS are showing a bid/offer spread of $1.50-$2.00. Enter an order for one contract at $1.50, another for $1.60, another for $1.70, and so on. Eventually, you will enter a price that gets filled immediately. That is the real price. Then enter an order for your full position at that real price.

Notice that the day-to-day volatility of LEAPS prices is miniscule since the time value is so great. This means that the day-to-day moves in your P&L will be small. It also means you can buy your position over the course of a month just entering new orders every day. I know this can be tedious, but getting screwed by overpaying for a position is even more tedious.

Look at the math below and you will see that an 8% rise in (FCX) shares will generate a 100% profit with this position, such is the wonder of LEAPS. That gives you an implied leverage of 12.5:1 across the $35-$38 space.

Only use a limit order. DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES. Just enter a limit order and work it until you find the real price.

This is a bet that Freeport McMoRan will close above $35 by the June 21, 2024 options expiration in 12 months.

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

Buy 1 June 2024 (FCX) $35 call at…………..………$8.00
Sell short 1 June 2024 (FCX) $38 call at…..………$6.50
Net Cost:………………………….………..………….….....$1.50

Potential Profit: $3.00 - $1.50 = $1.50

(1 X 100 X $1.50) = $150 or 100% 12 months.

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.

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