Spread Bet on Rio Tinto | Spread Trading

It has been said before, but it must be repeated that the mining exploration and development sector, in which Rio Tinto has a major part, is noted for being volatile and therefore more risky for the novice trader. Rio Tinto is dual listed, on both the London Stock Exchange and the Australian Securities Exchange, and is in the top companies on each, in the FTSE 100 and in the ASX 200 indices. Here’s the monthly price chart for recent years.

This shows the volatility, with prices up to nearly 6000 before the global economic crisis, and well below 1000 in 2009. The current price is a long way from the previous highs.

Rio Tinto is however a strong company, a multinational corporation that operates on every continent of the world. It is head-quartered in London, and has a management office in Melbourne, Australia. The company was founded in 1873, and named after the Spanish Rio Tinto, where mining operations were first started. Through a long succession of mergers and acquisitions the company has reached the current state of being a major supplier of many commodities including aluminium, iron ore, copper, coal, uranium, and diamonds. It also has some refining capabilities.

The company is divided into five operational groups, which include the aluminium, bauxite and alumina group; the energy group comprising coal and uranium; the garments and minerals group which includes titanium; the iron ore group; and the copper group which includes precious metals such as gold and silver. Operations are mainly centred on Australia and Canada, but the company is so large that there are significant operations in many parts of the world.

From a spread betting perspective, this is a company which has the volatility of the mining industry, but is much larger than most startup mining companies. It has successfully resisted takeover bids from BHP Billington and Chinese interests, so despite its current stock performance the long-term outlook for its products is good.

Spread Betting Rio Tinto Rolling Daily

Rio Tinto is a mining and exploration company, so you can expect the share prices to be volatile, and should be alert for any changes. The nice thing about trading such bigger-cap companies like BHP Billiton and Rio Tinto is that they come with lower margin requirements meaning that you are able to get greater leverage and take bigger risks (which however cuts both ways!).

The current quotation for a rolling daily spreadbet is 2919.1 – 2924.9. If your analysis suggests that the price will increase in the near future, you could place a long bet for £1.50 per point. You should be careful to consider your risk profile when deciding on the amount of the bet, bearing in mind the large point moves that are expected from this stock.

Suppose that you are correct and that the price goes up to 3922.6 – 3927.8. If you chose to close your trade, you could work out your winnings like this. Your long bet was placed at the buying price of 2924.9, and it closed at the selling price of 3922.6. 3922.6 minus 2924.9 is 997.7 points, which is the amount that you have gained with this bet. As you staked £1.50 per point, you have won £1496.55.

Of course you must be prepared for bets to lose as well as win, and in this case the price might have fallen instead of rising. Suppose it dropped to 2123.2 – 2128.6, and you decided to close your trade and accept your loss before it dropped any further. You can work out how much you lost in a similar way to that above. Your bet was placed at 2924.9, and you closed it at 2123.2 for a loss of 801.7 points. Unfortunately, that means you lost £1202.55.

As this price moves rapidly, it is important to keep track of it and you may want to consider using a stoploss order, where the price will be tracked by your broker and the spread bet closed if a certain level of loss is reached. Using one of these, you might find that your losing bet was closed out at 2515.6 – 2520.3. With a closing price of 2515.6 taken away from the opening price of 2924.9, in this case you have lost 409.3 points. For your wager, that amounts to £613.95.

Rio Tinto Futures Style Bet

For the trader looking at the midterm performance, a futures style spread bet may work out best. The current quote for the Rio Tinto far quarter is 2935.0 – 2947.0. Should you believe that the price will be going down, you could place a short or sell bet for £1.60 per point, and this would go on at the selling price of 2935.0.

Considering first that your bet may win, perhaps the price dropped to 2463.2 – 2474.7, and you closed your bet to collect your profit. The bet started at a price of 2935.0, and you closed the spread bet at 2474.7, which means you collected 460.3 points. With your bet of £1.60 per point, that multiplies out to a profit of £736.48.

If on the other hand the price went up, and you are facing a losing bet, you might decide to close the trade and accept your losses when the price was quoted at 3312.5 – 3323.6. As it was a sell bet, it closes at the higher or buying price which is 3323.6. Working it out, 3323.6 minus 2935.0 is 388.6 points. For your chosen size of stake, that amounts to a loss of £621.76.

Even winning traders lose frequently, but they win on average by making sure their losses are small, and letting their wins mount up by not taking them early. One way to keep down your losses is to use a stop loss order, as this saves you having to watch the markets every minute. Your spread betting provider watches the markets for you, and closes your trade if the loss goes too high. Say your bet closed at 3132.5 – 3144.6 with a stop loss order. The number of points you lost would be 3144.6 less 2935.0, or 209.6 points, which would cost you £335.36.