Rio Tinto PLC (RTP) 2/9/10 PriceWatch Alert Targets 8.48% Downside Protection

Posted: Tuesday, February 09, 2010 8:39 AM EDT
By: Market Intelligence Center Staff

Rio Tinto PLC (NYSE: RTP) closed yesterday at $187.58. So far the stock has hit a 52-week low of $89.61 and 52-week high of $240.43. Rio Tinto PLC stock has been showing support around 183.30 and resistance in the 196.14 range. Technical indicators for the stock are Bearish and S&P gives RTP a positive 4 STAR (out of 5) buy rating. RTP appears on the Investors Observer Momentum Plays list. For a hedged play on this stock, look at an Apr '10 185 covered call for a net debit in the $171.68 area. That is also the break even stock price for this trade. This covered call has a 67 day duration, provides 8.48% downside protection and a 7.76% assigned return rate for a 42.27% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the RTP Jan '11 105 Call and selling the Apr '10 185 call for a $68.85 debit. The trade has a 67 day life and would provide 7.32% downside protection and a 16.19% assigned return rate for an 88.00% annualized return rate (for comparison purposes only). Rio Tinto PLC has a current annual dividend yield of 1.41%. [ATU-Seven Summits Research]