UPDATE, PCU: Copper, Bright and Shiney
Today, Freeport-McMoRan, a company with a copper mine in Indonesia, bought Phelps Dodge (PD), a copper company with many mines worldwide (CBSmarketwatch.com). The deal was widely criticized because PD traded at 7 just five years ago. But that was then, wasn't it?
The deal comes after last week's discussion of the copper markets by Allen Sykora in Barron's, who interviewed several copper market watchers from various firms, including UBS, AG Edwards, and Archer Financial. The widely held belief is that copper prices will drop from their highs in 2007.
All this to say, that the PCU, which is in our circle of trust with its 10% yield right now, may need to be watched, like a water, boiling. In spite of its gain today, it may be worth looking to attempt a hedge with PCU puts in the event these Principals, Strategists and Anylists. Its puts extend out into the "sell in May and go away" shelf of 2007 in June. Today, they look like this, which you'll find here:
On the other hand, you may just want to give up some of that massive yield and take some off the table, and keep it ready to buy back as it declines with the price of copper next year. Of course, you won't be getting paid the 10% to wait. Stop loss orders, placed well below the climbing price (trailing orders are possible) may be a way to lock in the profits in the event of a decline too. The idea there is to figure out how close you'd like to lock up PCU, and just "set it and forget it".
The deal comes after last week's discussion of the copper markets by Allen Sykora in Barron's, who interviewed several copper market watchers from various firms, including UBS, AG Edwards, and Archer Financial. The widely held belief is that copper prices will drop from their highs in 2007.
All this to say, that the PCU, which is in our circle of trust with its 10% yield right now, may need to be watched, like a water, boiling. In spite of its gain today, it may be worth looking to attempt a hedge with PCU puts in the event these Principals, Strategists and Anylists. Its puts extend out into the "sell in May and go away" shelf of 2007 in June. Today, they look like this, which you'll find here:
| Strike | Symbol | Last | Chg | Bid | Ask | Vol | Open Int |
| 45.00 | PCURI.X | 3.50 |  0.10 | 3.20 | 3.60 | 713 | 1,192 |
| 50.00 | PCURJ.X | 5.30 | 1.10 | 5.60 | 5.90 | 23 | 198 |
| 55.00 | PCURK.X | 9.40 | 0.00 | 8.60 | 9.00 | 1 | 186 |
On the other hand, you may just want to give up some of that massive yield and take some off the table, and keep it ready to buy back as it declines with the price of copper next year. Of course, you won't be getting paid the 10% to wait. Stop loss orders, placed well below the climbing price (trailing orders are possible) may be a way to lock in the profits in the event of a decline too. The idea there is to figure out how close you'd like to lock up PCU, and just "set it and forget it".
posted by TheYieldHoe at
4:46 PM
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