Stock / Symbol: [private_monthly]Freeport-McMoran / FCX [/private_monthly]
Price at trade entry: $51.68
Price at this adjustment: $49.77
Trade entry date: Apr 19
Option Strategy: call ratio back spread to diagonal call spread
Adjustment: This trade was originally structured to benefit from a pop when the stock announced earnings on April 20th. If [private_monthly]FCX[/private_monthly] is trading at or under $49.50 by June expiration, this trade will yield a 11% return. However, if the stock is between $50 and $59 by June 17th, this trade loses money. So, with [private_monthly]FCX[/private_monthly] looking like it's bottoming here are ready for another move higher, we're going to roll the current position into a diagonal call spread. In the new structure, our profit range is at $50 or higher by July expiration.
Those of you not currently in this trade, the Nov 50 / Jul 52.25 diagonal call spread is a good entry point.
Trade Details:[private_monthly]
BTC -2 FCX Jun11 50 Calls
STC 4 FCX Jun11 55 Calls
for a net debit of $1.30 per contract
then
BTO 1 FCX Nov11 50 Call
STO -1 FCX Jul11 52.5 Call
for a net debit of $3.65 per contract
Requirements
Cost/Proceeds $525.00
Option Requirement $0.00
Total Requirements $525.00
Estimated Commission $25.90
[/private_monthly]
Max Risk: $525 (inc $100 credit taken in on Apr 19 entry)
Max Reward: $80 or 15% by Jul expiration
Profit Range: $51 - $55 (at Jul expiration)
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