There's a small swing low at 496 so using that as my stop, I've gone long at 512. It was an early peak but the stock is running again now and is up at 515. I've also bought Fortescue April 500 calls at 21 cents which were quite cheap, probably because the stock has been chopping around for a month or two.
I've been substituting a few of my watchlist stocks because I never seem to do much in things like Mirvac. So one of the new stocks I've chosen is Murchison Metals which is another West Australian iron ore stock. I wasn't confident enough to buy a very minor pullback last week and now the stock has sped away like most of the sector. Unlike Fmg, the relative distance to that last swing low is too far for me to be comfortable with buying the breakout. I'll be looking to buy any corrections though.
I've just airily said that the Fortescue options were cheap. Well, technically they were expensive because recent volatility has drifted down to 20% and I bought these short dated calls at an implied volatility of around 30%. However, since I think the stock is breaking out, the historical volatility goes out the window if I'm correct and the options in this stock generally carry more premium than they do right now.
With the rest of the sector running, I'm sufficiently confident to buy something short dated and slightly in the money so as to limit the premium I'm paying and get more equivalent stock exposure.
3.42 Lihir update: out at 398 because despite the gold price continuing firm (in USD terms) Newcrest is down 2%. This means that the discount has narrowed. Newcrest are saying that their offer is full and fair also so although I'm pretty confident that they'll sweeten the bid eventually, I don't want to hang around forever.
Here's the chart.
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