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FMG - Fortescue Ltd

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Inflation is coming. Looks like we'll be seeing a surge in Chinese manufacturing as evident from a staggering 18% annualised GDP growth in Q1. We should see commodities continue the hike up particularly iron and oil.

+ a lot of uncertainty with Vale. Brazilian government is highly dysfunctional and a huge political risk. Good for Aussie miners.
 
I really, really want to stay in but (sad to say) I think I’m going to be out of it this week. Not due to anything wrong, just Other opportunities taking priority. I need a good excuse to system override!
 

Update on this, My hunch was correct, The CEO Elizabeth Gaines has confirmed that since Eliwana was first announced as a replacement project for the Firetail mine, more ore bodies around Firetail have been discovered, so production will be continuing at firetail for a while creating a significant over lap between fire tail and eliwana, this will result in higher volumes while this continues.

The future production guidance will be released in June after they have assessed what the mining plan for these additional ore bodies will be, earlier in the year FMG applied for and was approved a larger shipping quoter at the port, I assumed this was for the Iron bridge project that is some time away, but perhaps they raised the shipping quoter to allow the additional production from the combined production of eliwana.

Depending on the mine plan this might raise production to 200 Million tonnes next financial year, up from around 180 current forecast.
 
systematic said:
I really, really want to stay in but (sad to say) I think I’m going to be out of it this week. Not due to anything wrong, just Other opportunities taking priority. I need a good excuse to system override!
Click to expand...
Would it help if I said this could be $30 by the end of August
 
systematic said:
Ha, ha! Yes, that may well sway me!
Click to expand...

Systematic if you can find another investment that offers a better value value proposition than FMG at the moment then let us in on the deal. .
Frankly I think everyone on FMG at the moment are making out like bandits. And it has a ridiculously low PE ratio to boot.
 


Markets are starting to get very concerned with china's baby bust though (finally).
 
Added some FMG today.
May use some for covered calls in the future
 
I'm out

I guess finding a reason to override was never going to work...I'm just a ?

Between FMG (21 months) and CIA (19 months) I was >30% of portfolio in iron ore...and that's after offloading another iron ore play at the end of last year. So, I was pretty well weighed down with it all

I've still got CIA so I'll go see if anyone is on that thread. Long may FMG prosper ?
 
Dear All,

(Posted in the Options Thread also).

Having re read my financial modelling text book and watched several UTube videos on Options trading over the last couple of weeks I am now getting ready to get started with my first Options trade. I hope to place my first trade this week.

Starting simple I plan to place a covered call on a portion of the FMG shares that I hold. I thought I would post my planned trade here in order to see if anyone can see any glaring issues or have any advice on the trade.

Background.

I hold FMG shares purchased on 4th May at an average cost of $22.53. I hold more shares than the shares in the options contract I plan to trade.

The Trade.

Sell 10 contracts (1,000 shares) of a 17th June FMG call with XP of $24.76. The XP is 7.8% above current SP as on 7th May. 1,000 shares from my account will be ‘held’ as collateral for the trade. The premium is $0.470 ($470) per contract and the contract fee is $35. Total received premium will be $470 - $35 = $435.

Possible outcomes.

1. If FMG SP remains below $24.76 up to 17th June the Option will expire and my gain is $435.

2 If FMG SP rises above $24.76 the option will be executed by the purchaser. My shares held as collateral will be sold. At the XP of $24.76, there would be a gain of 9.9% above my original purchase (4th May) cost of the shares ( (24.76-22.53)/22.53 ), plus a share trading fee.

Other thoughts.

I want to hold FMG long term, however I also want to see if I can get some ‘income’ from holding them, in addition to the possible healthy dividend. If the SP rises to $24.76, I am happy to sell and get a gain of 9.9% over the 4 weeks.

I am cognisant that the results and dividend will be announced in Mid/End August so I want to complete the trade before then.

I believe, but not sure, that if the contract expires and is not executed, the premium received will be considered ordinary and assessable income for tax purposes. It is not considered a Capital Gain. If the contract is executed then the proceeds, and costs, and premium are all included in the Capital Gain calculation with no 12 month 50% discount.

Any advice or critical comments would be welcomed. Thanks.

Gunnerguy.
 

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Unfortunately it's not actually possible for us to advise you what to do gunnerguy as it's not technically legal to do that without being a legally qualified financial advisor.

What I will ask is how you got to these particular numbers and what makes you think you're going to be able to sell the contracts at these prices/strike/expiry date?

I also think some of your calculations are off as 0.47x100=$47.


I presume you mean you want to sell options for a $4.70 premium with a $24.76 strike price and expiry of the 17th of june?
 
Have you done any paper trading yet?

gg
 
Over9k
Thank you for your comments. I guess my wording was incorrect. Being a Master in Financial Planing graduate myself I am not looking for advice. I know the rules better than most. I am simply wanting any experienced option traders, if interested, to critically assess that my baseline assumptions/calculations are correct and if possible to politely comment.
As explained, maybe not clearly enough, I am looking to sell 10 call contracts (each contract is for the standard 100 shares) at a premium of $0.47. 10 contracts = 1,000 shares, thus 1,000 x $0.47 = $470 premium. I think that is correct or am I missing something Over9K ?
The premium is from the commsec options series available online for COB on Friday. Yes the prices will change in Monday.
I already have an options trading account and the premiums and option series and dates are taken from current market data.
For balance, if you have traded options Over9k I would welcome further comments.
For those who have experience in options trading, I welcome any comments.
Gunnerguy.
 
Garpal Gumnut said:
Have you done any paper trading yet?

gg
Click to expand...
Garpal
No paper trading in options, however 27 years of monthly/quarterly share trading across multiple International markets. Retired as a result of successful share portfolio management and trading but trying to have some fun and get more income from assets that I already hold.
I’ve done many years of financial modelling but avoided options due to their cost of trading. Now that my share holdings are large enough the cost of option trading is insignificant.
And I want to learn more and grow my knowledge.
Gunnerguy.
 
That strategy is perfectly valid if that’s the position you want to take, although as over9k pointed out your original post said $470 per contract which is wrong, it’s $470 in total for all 10 contracts, $47 per contract.

The main thing that you should be thinking about in my opinion is whether this is the best way to get cash out of holding FMG, I mean is $0.47 enough compensation for potentially missing a big upsurge + a $2 dividend in 4 months or so?

—————

The way I look at it is, you are getting paid $0.35 per month for this contract, which is an 18% return per year if you are able to just keep selling contracts at the level, add to that the dividend if you don’t get exercised before the end of August and you are earning a very healthy return.

but you are exposed to two risks,

1, the share price drops and the dividend is cut, meaning your income stream dries up and some of your capital is lost.

2, the share price rockets higher and it turns out the initial $0.47 premium is dwarfed by the capital gain and dividends you would have received if you had just taken a standard buy and hold.

accepting the $0.47 is the lower risk option, because even if scenario 1 happens you have at least extracted an additional $0.47 out of the deal before the price collapsed, so had less money on the table.

But only you can decide if “de-risking” your position by $0.47 / share is worth the opportunity cost of limiting your upside potential.

If all you really want is the $2 capital gain, and want to de-risk your position by $0.35 per month if that gain doesn’t arrive, sell the call.

but if you really want to hold FMG as a dividend payer with a big upside, don’t sell the call.
 
Your wording in the post says "$470 per contract" but that would be $4.70 per option, not $0.47, hence my confusion?

I've never sold an option (and probably never will), only ever bought.
 
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