FMG

by Raymond Chan

What a strong recovery in the resources. I had formulated strategy below but did not have time to post it this morning. It has closed up at least 20% return at the end of the day. Here it is anyway, should there be another opportunity in the next few days to implement it. WY
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Last week (ended 21 Oct 2011) FMG had fallen the most out of the three resource stocks FMG down 13%, RIO down 8.4% whilst BHP has held steady down only 3.2%.


Closing at $4.25 on Friday (21 Oct 2011), its close to the $4.00 level it fell to in early October before rising to around $5.15.

It's a good chance FMG will move back up to the early $5.00 like what it did 2 weeks ago.

Supported with third quarter result on target, progressing well to expand to 155Mtpa,with cash of US$2.1b and US$4,3b expansion work committed.

A $6k spend to take advantage of impending turnaround.

Buy Dec11 FMG $425 call and sell Dec11 $525 call
for net cost of  41c

The spread had a net delta of about 0.3 on Friday's close. 
A $1 rise on FMG will return about 30c to the spread, doubling money.

 

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