We created a Mining Watch List back on May 22 for a few companies that provided us with some trades to go long. By mid-June we were out and since then, all four of the stocks have been hammered to levels where I think it’s time to go long again.
I will list some call options that will require you to do your own homework because the only ones I really like are the copper plays. The other sectors like steel and aluminum have been hit but I think cooper is the better play. We will compare prices from May to where these stocks are now and go from there.
BHP Billiton (BHP, $70.89, up $1.42). The stock was trading at $92. The stock set a 52-week high of $95.61 on May 19 but it has been all downhill since up until now. BHP is the world’s largest miner and recently posted record profits of $15 billion on revenue of $60 billion for the quarter. However, it fell short of Wall Street’s estimates of nearly $16 billion. Although many now believe its bid for rival Rio Tinto (RTP, $388.60, up $10.01) may be in trouble, the stock may have bottomed. The October 70 calls (BHPJN, $4.50, up $0.60) and the January 80 calls (BHPAP, $3.90, up $0.80) were active today.
Alcoa (AA, $32.12, up $0.43). In a little over two months, Alcoa has dropped 10 points and is a stone’s throw from its 52-week low of $26.69. I don’t know if the sell-off in the stock is warranted but I do know that demand for steel hasn’t diminished totally. I’m still on the fence with Alcoa but the October 35 calls (AAJG, $1.25, up $0.11) were the most active in the October call chain.
Freeport-McMoRan (FCX, $93.66, up $2.57). This stock was at $117 and made it up to $127 before falling to a recent low of $75.81 on August 5. Since then, the recovery has been swift and fast. Take a look at the October 100 calls (FCXJT, $5.50, up $0.85) which jumped 18% today.
Southern Copper (PCU, $26.30, up $1.75) is another stock that we can add to our list. The stock has been taken down to attractive levels and we can play the bounce. The October 25 calls (PCUJE, $2.85, up $0.95) were up 50% today while the October 30 calls (PCUJF, $0.80, up $0.35) were up nearly 80%. Long-term bullish traders may also want to look at the January 30 calls (PCUAF, $1.60, up $0.45).
The market did well with oil going jumping over $5 today. The Dow ended the day with a 12 point gain and closed at 11,430, a 100 points higher off its lows. The Dow is 200+ points lower from where we started the week and I don’t think we will have a 200 point rally on Friday with all of the rhetoric going on right now. However, I do think it’s a good time to give copper another look.
Rick Rouse
Rick@OptionsMentoring.com
