Monday, 17 September 2012

Rio Tinto (RIO) ... trousering some calls

Whereas the ECB just jawbones, the FED gets on with it. So this latest wodge of USD has to find a home. The usual port of call is in commodities. With that in mind, I reckon some December calls in Rio Tinto (RIO LN, mkt cap £63bn) look attractive. A December strike at 4000p/shr can be bought at a cost of just 24p/shr. I note that prior rounds of QE have shoved RIO higher by 95% (QE1), 19% (QE2), and 31% (LTRO). On that basis, getting RIO 30% up by Christmas, to say 4300p/shr does not seem much of a stretch. And if that happens, the return is c. 12x. Those odds seem perfectly acceptable, so I trousered some calls.

RIO share price and prior QE
RIO share price vs. FTSE. A gap

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