Volatility Chart Du Jour: FCXby Adam on July 23rd, 2008 at 8:16 am |
If this volatility chart looks familiar, it’s because it is almost an exact replica of AAPL heading into earnings.
FCX reported yesterday morning, basically the same time in options world as AAPL. And disappointed, or at least didn’t meet some whisper or something. And got hit, as much as 8%.
But that’s where the similarities end. FCX got caught in the wrong industry in yesterday’s “sell all energy and mining” blast. And whereas AAPL volatility did almost precisely what the graph suggested, and went down from the mid 50’s to the high 30’s, FCX volatility amazingly didn’t budge. It closed near 60.
Kind of cries out for some options sales, which then makes you wonder if there’s another shoe to drop or pop.
Hey Adam,
Is the volatility or options action telling you which way this may head? I know there was some speculation as to a “buyout” on FCX, however, FCX announced in their conference call yesterday that they were not looking to grow their business through acquisition and would be internally expanding operations. Thoughts? The chart looks incredibly shitty to be long currently so I’m cautious to be holding a position in this one. Let me know what you think. Thanks!
July 23rd, 2008 at 11:24 amyeah, chart looks awful. You do have the rumors on this one, which could account for part of the volatility. It’s more just volatility in energy/mining though I think, they’re all kind of high.
I sold some puts into this, that’s all I have.
July 23rd, 2008 at 11:33 amSold puts? Put spreads? What Strike? Looks like the 80s might be the strongest support levels for this one? Sell the front month options? Long-term I think there will be much more M&A consolidation industry-wide to help control costs and increase international exposure and so I dont want to give up on the stock completely only to miss a takeover / a rebound in commodities.
Do you ever look for unusual options activity ahead of earnings? If you do, anything on your radar? Let me know, its hard to find options to buy without paying some absurd premium for volatility.
July 23rd, 2008 at 1:42 pmJust sold some near money Augs, just as an unaggressive long play.
I don’t really look for unusual options ahead of earnings. It’s dangerous to try to interpret. What if a jillion puts trade, is it smart money or nervous longs? Very tough to know just looking purely at numbers.
July 23rd, 2008 at 4:20 pm