Sold FCX Naked Calls

FCX dropped at the open today, so I didn’t wait any longer to sell new options.  While FCX was trading at $64.84 I sold two FCX October 80 naked calls (FCXJP) for $1.20 each and received $228.50 after commissions.  I almost sold one call at the October 75 strike since the premium was almost double, but decided that my risk could be lower by selling two farther out of the money options.  I have an extra $5 cushion minus the $1 less in premium ($4 total more cushion) to the upside if FCX stages a comeback. 

I decided to sell new calls because I’m long 100 FCX shares that continue to fall.  I think FCX will come back, but have no idea if it will be tomorrow or next year.  To keep my losses to a minimum, I’m selling calls to take in cash now.  I sold so far ($15+) out of the money because I want to leave room to gain on the stock in a rally.

I should’ve waited longer this morning.  By 10:15 am, FCX has reversed direction and is up a little for the day.  My calls are now trading at 1.45/1.50 bid/ask.  With 17 trading days, including today, remaining before expiration I’m not worried about it too much.  If it does rally, I’ll be able to profit on the FCX naked put I sold yesterday and on the underlying stock too.  If it tops out in the upper $70s I “win” on all fronts.

My FCX position:

• I’m short three FCX October 80 calls
• I’m short one October 60 naked put
• I’m long 100 FCX shares