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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