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) – TAKE PROFITS
SELL the Freeport McMoRan (FCX) April 2023 $30-33 vertical BULL CALL debit spread at $2.98
Closing Trade
4-18-2023
expiration date: April 21, 2023
Portfolio weighting: 10%
Number of Contracts = 40 contracts
We have pretty much squeezed all the juice out of this lemon. I need to take profits here to make room for a new position. As I am currently 100% invested, I need to take profits on my existing position before I can establish a new one in these idyllic trading conditions.
I knew full well when the regional banking crisis first hit a month ago, stocks were wildly overreacting to the downside, especially those for large bank. That turned out to be the case, with billions of dollars of new deposits pouring into the safety of large bank balance sheets and de facto government guarantees.
It helps also at the time that the Volatility Index ($VIX) had just rocketed to $31 and a Mad Hedge Market Timing Index that just plunged to only 17.
With the stock now an eye-popping 30% above its nearest strike price, I think it’s safe to call this one a win.
I am therefore selling the Freeport McMoRan (FCX) April 2023 $30-33 vertical BULL CALL debit spread at $2.98.
DO NOT USE MARKET ORDERS UNDER ANY CIRCUMSTANCES.
Simply enter your limit order, wait five minutes, and if you don’t get done cancel your order and lower your offer by three cents with a second order.
If you can’t get a price you like just hold on to the April 21 option expiration in four trading days.
As a result, you get to take home $1,520 or 14.62% in 11 trading days. Well done and on to the next trade!
A severe short squeeze in copper is developing, leading to a massive price spike later in 2023. Copper prices could jump from the current $9,000 per metric tonne to $15,000 by December, say industry insiders.
A Chinese economic recovery and exploding EV growth are the reasons. Copper is the only industrial metal up this year, some 6%. The rest are all down on recession fears. Is the red metal now recession-proof?
I believed the fundamental argument for Freeport McMoRan is so compelling that I chose to dive in, even during a period of extreme volatility.
Please remember that I told you earlier that each Tesla (TSLA) needs 200 pounds of copper, that Tesla sales could reach 2 million vehicles this year, and that they could sell 4 million if they could make them. The ten-year target is 20 million cars a year.
This was a bet that the (FCX) would not fall below $33.00 by the April 21 option expiration in 14 trading days.
If you are looking for other copper plays, please take a look at the United States Copper Fund (CPER), First Quantum Minerals Ltd. (FM.TO), Antofagasta (ANTO.L), hang on. We are going much higher once the stock market bottoms.
I have a feeling that Freeport McMoRan is my new rich uncle, cutting me generous but undeserved maintenance checks every month.
Here is the specific accounting you need to close out this position:
Sell 40 April 2023 (FCX) $30 calls at………….…….............…$13.00
Buy to cover short 40 April 2023 (FCX) $33 calls at…………$10.02
Net Proceeds:………………………….…..............…………………….$2.98
Profit: $2.98 - $2.60 = $0.38
(40 X 100 X $0.38) = $1,520 or 14.62% in 11 trading days.
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.
