Profit-taking is striking stocks across the board this morning. And many market darlings are retreating to lower-risk entry points. So if the sea of red has you depressed, consider it your silver lining.
One of the most attractive dip buys on Wall Street is Freeport-McMoRan Inc (NYSE:FCX). Indeed, traders who missed the earnings-induced launch in FCX are now receiving a second chance.
Freeport-McMoRan is one of the most actively traded stocks in the metals and mining space. And for a good reason. With a beta of 2.57, it’s plenty volatile offering quick profits to participants on the right side of its swift swings.
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The nascent uptrend has an earnings announcement to thank for its jumpstart. FCX launched 14.7% last Tuesday on monster volume.
Resistance levels melted in the face of its fiery flight and now the stock finds itself soundly in bullish territory. The 20-day, 50-day and 200-day moving averages are all pointing higher. In this environment, buying dips is a no-brainer.
This week’s retreat dropped FCX back to its 50% retracement level, which means it’s given back half of the gains from its prior advance.
The 50% zone marks the sweet spot for where dip-buyers typically congregate, so it should come as no surprise that this morning’s weakness is getting bought up.
The FCX Trade
Freeport-McMoRan’s cheap price tag makes it a prime candidate for selling puts. The margin requirement for selling puts is minimal, which elevates the potential return on investment.
Sell the Sept $13 puts for 25 cents or better. If the stock sits above $13 at expiration, you will capture the max profit of $25 per contract. In selling the put, you are obligating yourself to buy 100 shares of stock at a cost basis of $12.75.
If you’re not a willing buyer at this discounted price, then close the position if FCX falls to $13.
As of this writing, Tyler Craig held bullish positions in FCX. Want to learn how to master the art of option selling for high-probability cash flow? Check out Tyler’s recently released video series through Tackle Trading on how to systematically sell iron condors for monthly income.
