Cabot Profit Booster Issue: July 1, 2025

After a weekend that many feared would sink the market as the Middle East situation was flaring up, to the surprise of many, the market didn’t sell off and, in fact, by week’s end the S&P 500 had gained 3.4%, the Dow had rallied 3.8% and the Nasdaq added 4.2%.

Before we dive into this week’s idea, we are going to exit our BIRK Covered Call as the stock has broken below our stop level. We will walk away from this trade with a small loss.

To execute this trade you need to:
Sell BIRK Stock
Buy to Close the BIRK July 55 Call

The Stock – Freeport McMoRan (FCX)

Strengthening copper prices as the result of a global supply squeeze of the metal, plus record-high gold prices, have combined to form a benign backdrop for Freeport. The Phoenix-based company is one of the world’s largest copper and gold miners and is benefiting from rising prices for both metals.

Copper comprises 77% of its annual sales and gold accounts for 21% of sales, with the former coming on the back of the recent tariff-related rush for industrial users of the red metal, while demand for the yellow metal has been persistent this year in the face of ongoing geopolitical turmoil and worries over inflation. But copper is Freeport’s primary focus, and on that front, benchmark prices for the metal rose to the highest level in four years, which is putting additional pressure on an already tight global copper market.

Most of the metal’s flows are to the U.S., where traders are directing it to take advantage of currently high premiums in the spot market ahead of the results of a federal investigation into copper imports (expected in November) that could result in significant tariffs if it finds that copper imports pose a threat to national security. (By one estimate, due to Freeport’s leverage to copper prices, an increase of as little as ten cents per pound in prices could add approximately $425 million (!) to its annual EBITDA.) Meanwhile, industrial demand for copper among developed nations worldwide is projected to increase this year, with major consumers like China using more of the metal in support of copper-hungry industries like electric vehicles (EVs) and renewable energy, along with increasing infrastructure and urbanization uses. (Indeed, several industry reports have suggested that China’s copper inventories have fallen to dangerously low levels and risk depletion at some point this year, placing additional upward pressure on prices and benefiting Freeport.)

Although its Q1 results were mixed, with revenue of $5.7 billion declining 9% year-on-year, while earnings of 24 cents a share beat estimates by 3%, copper and gold production was strong, with copper sales exceeding expectations. Management expects cash flow and EBITDA trends to strengthen in the second half of the year, with a potential $800 million annual financial benefit from the premium pricing of U.S. copper sales—and with electrification trends and infrastructure investments providing additional longer-term support. Analysts see top- and bottom-line growth of 6% and 12%, respectively, which is likely too conservative in view of copper’s ongoing strength.

Technical Analysis

Despite its exposure to gold, FCX didn’t benefit from the comprehensive strength across a big part of the mining sector for most of the past year. Volatile copper prices contributed to the lagging performance, but with the red metal on the upswing, the stock has flourished in the last couple of months and, significantly, is building forward momentum. Last week’s breakout to six-month highs on solid volume underscored this. Stop - 38

The Covered Call Trade

Buy Freeport McMoRan (FCX) Stock at 44, Sell to Open August 44 Strike Calls (exp. 8/15) for $2, or a Net Price of 42 or less

Static Return: $200 per covered call (4.76%)

Breakeven: 42

Covered Call Return (if assigned): $200 per covered call (4.76%)

Please note, the stock and options prices will be moving throughout the day, so these prices are simply an approximation of prices that you should be able to achieve.

However, the important component of this equation is that the stock price paid, minus the premium received via the call sale, equals the approximate Net Price, or 42 or less. (In this case 44 minus 2 = 42. Or another example is you could pay 44.25 for the stock and sell the call for 2.25, which also equals 42.)

For every 100 shares of stock you buy, you can sell 1 call. For every 200 shares of stock you buy, you can sell 2 calls. And so on …

Open Positions

The next Cabot Profit Booster issue will be published on July 8, 2025.

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