Freeport-McMoRan Copper & Gold Inc. (FCX), BHP Billiton Limited (ADR) (BHP): Traders Could Generate 30% a Year in Income With This Copper Miner

The stock is currently trading near $30.60, which is just 10 times expected earnings for 2014. Given the growth prospects for the company, this is a pretty attractive valuation. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) has been trading higher for the past two months, and I expect the company to continue to rebound as sentiment shifts for China’s overall growth.

In order to generate income on this bullish play, I want to sell FCX Oct 30 Puts near $1.25. Keep in mind, for each contract that we sell, we are obligated to buy 100 shares of Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) at $30 if the stock is trading below $30 when the puts expire on Oct. 18.

Since we have an obligation to buy 100 shares at $30, and we are receiving $1.25 per share, or $125 per contract, for accepting this obligation, we will need to set aside an additional $28.75 per share, or $2,875, in case we are called upon to buy the shares.

So, assuming our puts are not exercised, the $125 in income against the $2,875 represents a 4.3% yield in the next 52 days. If you set up trades like this throughout the course of the year, you would be able to generate 30% per year.

Now, assuming Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) trades back below $30 and we are obligated to buy the shares, I am still happy with this trade. This is because we get to buy this already attractively valued stock at a 6% discount to recent prices. Additionally, FCX pays a quarterly dividend of $0.31 per share. Buying the stock at a net cost of $28.75, our dividend yield would be 4.3%, and we can also expect capital gains as the stock moves higher.

I’m excited about this trade because it allows us to generate a very attractive rate of return on our capital if the puts are not exercised, along with the opportunity to buy a quality dividend stock at a significant discount if the puts are exercised.

Note: Investors have been conflicted about whether they should continue to buy stocks. And recent global events have them scared about volatility and market crashes. A put selling strategy can be the perfect way to generate income and help protect your assets. My colleague, Amber Hestla-Barnhart, has helped her Income Trader subscribers earn between $1,808 and $150,000 this year alone with this strategy. Click here to learn more.

The article Traders Could Generate 30% a Year in Income With This Copper Miner originally appeared on ProfitableTrading.com and is written by Zachary Scheidt.

$1,000 Per Month Trading System

You could collect $1,000 or more per month without buying a single stock. Click here to learn how…