Driven by rising metals prices and uncertainty surrounding global metals trade, Freeport-McMoRan Inc (NYSE:FCX) kicked off 2017 with a bang. FCX stock surged more than 26% in January, hitting a fresh 52-week high in the process. But unsavory developments at its most profitable mine, the Grasberg mine in Indonesia, have created quite a stir for Freeport-McMoRan investors so far in February.

The question is, “Is it time to double down on FCX stock, or bail on the shares until the Grasberg situation rights itself?”

The Grasberg mine is the world’s most productive gold mine and the second-most-productive copper mine. It also Freeport’s biggest revenue generator. The trouble revolves around mining and export permits with the Indonesian government.

Specifically, the government is happy to issue a new mining permit, but is balking on the original terms of the export agreement — which included lax export taxes. Freeport says it needs the original agreement in for its long-term investment plans to work out.

So far, there is no deal, though Freeport remains hopeful an agreement will be reached.

In the meantime, copper prices spiked on Friday, and are likely to continue higher after BHP Billiton Limited (ADR) (NYSE:BHP) declared force majeure at its Escondida mine in Chile, the world’s biggest copper mine. Production at Escondida is now on hold, and copper prices surged 4.6% following the news.

The jump in copper was a boon for FCX stock, which added 2.6% on Friday — though the shares are still down more than 3% month-to-date. Technically, support lies in the $15 region for Freeport-McMoRan, with 50-day moving average providing additional leverage for the shares. Resistance is thick in the $16.50-$17 region, however, and likely won’t fall unless the Grasberg mine situation is resolved favorably.

Sentiment is understandably mixed as a result. Thomson/First Call reports that 13 of the 20 analysts following FCX stock rate the shares a “hold” and the 12-month consensus price target of $14.76 represents a discount to Freeport-McMoran’s close on Friday. In short, the resolution of the Grasberg mine issue could elicit a round of upgrades or downgrades depending on how things play out.

Click to Enlarge Surprisingly, FCX options traders have sided firmly with the bulls. Currently, the March put/call open interest ratio comes in at 0.58, with calls nearly doubling puts among FCX options set to expire within the next two months. What’s more, the most popular March strike is the $18 call, where more than 30,000 currently reside.

Volatility is also notably brisk for FCX stock. March implieds are pricing in a potential move of more than 11% for the shares, placing the upper bound at $17.59 and the lower bound near $14. If the Grasberg mine situation plays out unfavorably, $14 is a definite possibility, while the upper bound near $17.59 could fall in short order on a positive outcome — especially given BHP’s trouble in Escondida.

2 Trades for FCX Stock

Call Spread: With March calls leaning toward a bull run for FCX, I’m inclined to side with the majority here. Traders looking to bet on a resumption of January’s rally might want to consider a March $16/$17 bull call spread. At last check, this spread was offered at 37 cents, or $37 per pair of contracts. Breakeven lies at $16.37, while a maximum profit of 63 cents, or $63 per pair of contracts, is possible if FCX stock closes at or above $16 when March options expire.

Put Spread: On the other hand, Indonesia has been stubborn when it comes to the Grasberg mine in the past, and a holdout on a deal could weigh heavily on FCX stock. Traders siding with the bears might want to consider a March $14/$15 bear put spread. At last check, this spread was also offered at 29 cents, or $29 per pair of contracts.

Breakeven lies at $14.69, while a maximum profit of 69 cents, or $69 per pair of contracts, is possible if FCX stock closes at or below $14 when March options expire.

As of this writing, Joseph Hargett did not hold a position in any of the aforementioned securities.