Southern Copper Plunges 2.8% Amid Surging Short Interest and Sector-Wide Copper Volatility

Summary
• Southern Copper (SCCO) tumbles 2.83% to $143.45, hitting a 52-week low of $141.84
• Short interest jumps 9.14% to 9.47M shares, 9.91% of float—far above sector average
• Copper prices surge to $5.4/lb on AI demand and supply tightness, yet SCCO underperforms

Today’s sharp selloff in Southern Copper reflects a perfect storm of bearish positioning and sector-wide uncertainty. With short interest now exceeding 9% of the float and copper fundamentals tightening, SCCO’s 2.8% drop underscores a critical inflection point. The stock’s 52-week high of $149.75 is now a distant memory, as traders brace for a potential breakdown below key support levels.

Short Squeeze Fears and Copper Market Divergence
Southern Copper’s intraday collapse stems from a confluence of factors: a 9.14% spike in short interest to 9.47M shares (9.91% of float), far exceeding the sector’s 1.57% average, and divergent copper market dynamics. While global copper prices hit $5.4/lb on AI-driven demand and U.S. tariff uncertainty, SCCO’s fundamentals remain pressured by $15B in capex and rising operating costs. The stock’s 2.8% drop mirrors broader sector jitters, as analysts downgrade SCCO from 'Strong-Buy' to 'Hold' and cut fair value estimates to $118.29. Short sellers are capitalizing on the gap between copper’s bullish narrative and SCCO’s execution risks.

Copper Sector Volatility Amid AI-Driven Demand Surge
The copper sector is in a tailwind environment, with prices up 35% YTD and Sprott’s copper ETF surging 46%. Yet SCCO lags peers like Freeport-McMoRan (FCX, -1.12%) and Coeur Mining (CDE, +205.5% YTD). This divergence highlights SCCO’s unique challenges: high capex, elevated short interest, and a 29.1x P/E ratio versus the sector’s 9.1x average. While AI and EV demand justify copper’s rally, SCCO’s execution risks—$15B in capex and 75% payout ratio—make it a laggard in an otherwise bullish sector.

Options Playbook: Capitalizing on SCCO’s Short-Term Volatility
• 200-day MA: $105.53 (far below), RSI: 97.72 (overbought), MACD: 3.62 (bullish)
• Bollinger Bands: $118.33 (lower), $148.51 (upper)—SCCO at 95% of lower band

SCCO’s technicals suggest a short-term rebound is likely, but structural risks persist. Key levels to watch: $139.89 (30D support) and $95.79 (200D support). For aggressive traders, the SCCO20251219P140 put (strike $140, exp 12/19) offers 98.93% leverage and 123% price change potential. This contract’s 34.33% IV and 0.0479 gamma make it ideal for a 5% downside scenario (target $136.28).

• SCCO20251219P140: Put, $140 strike, 12/19 exp, IV 34.33%, leverage 98.93%, delta -0.3037, theta -0.038, gamma 0.0479, turnover 3,696
Payoff: $3.72 if SCCO drops to $136.28 (5% downside).
• SCCO20260116P135: Put, $135 strike, 1/16 exp, IV 38.39%, leverage 44.83%, delta -0.2801, theta -0.0538, gamma 0.0194, turnover 25,106
Payoff: $8.45 if SCCO drops to $136.28 (5% downside).

Aggressive bulls may consider SCCO20260116C145 (call, $145 strike) into a bounce above $149.75. However, the 37.5% downside risk and 71.37% leverage ratio make puts more compelling. If $139.89 breaks, SCCO20251219P140 offers short-side potential.

Backtest Southern Copper Stock Performance
The backtest of SCCO's performance after an intraday plunge of -3% from 2022 to the present shows favorable short-to-medium-term gains. The 3-Day win rate is 53.38%, the 10-Day win rate is 54.85%, and the 30-Day win rate is 55.91%, indicating a higher probability of positive returns in the immediate aftermath of the plunge. The maximum return during the backtest was 7.26% over 30 days, suggesting that while there is some volatility, SCCO can exhibit strong recovery and growth in the following weeks.

SCCO at Crossroads: Short-Term Volatility vs. Long-Term Copper Tailwinds
Southern Copper’s 2.8% drop reflects a critical juncture between short-term bearish positioning and long-term copper demand. While AI and EV trends justify copper’s $5.4/lb surge, SCCO’s $15B capex and 9.91% short interest create near-term headwinds. Traders should monitor the $139.89 support level and FCX’s -1.12% move as sector barometers. For now, the SCCO20251219P140 put offers a high-leverage play on a potential 5% downside. If SCCO breaks below $139.89, the 200D support at $95.79 could become a 20% target. Watch for FCX’s next move—it could signal sector-wide rotation.