I Shorted Rio Tinto and Champion Iron

I made my 2nd and 3rd trades for 2022 – Rio Tinto short and Champion Iron short via CFD..

Short closure for Rio Tinto and Champion Iron on 19 Jan 2022

Summary

  • Rio Tinto
    • shorted from 14-18 Jan at 110.12 – 110.60
    • closed on 19 Jan at 110.159 to 110.68
    • position size is $120k
    • incurred net lost (including commission and holding charges) of about $100
  • Champion Iron
    • shorted from 17-18 Jan at 6.27 – 6.46
    • closed on 19 Jan at 6.26 – 6.28
    • position size is $180k
    • incurred net profit of about $2.9k

Why I Entered the Positions

  • This is a short-term trade against iron ore prices
  • Iron ore commodity prices may have peaked
  • Iron ore-related stock prices may have peaked
  • Fundamentals have not turned around yet to validate optimism in iron ore stock and commodity prices

Why I Exited The Position

  • China started to ease financial conditions, buoying sentiment for iron ore at least for the short-term
  • Iron ore commodity prices starting to surge
  • Iron ore-related stock prices seem to have more short-term upside momentum

Conclusion

This is one of the cases where it pays to be agile. I closed the positions quickly when China started to ease conditions and was fortunate enough to still make a small profit.

Sometimes, there is an initial over-reaction at the open and prices rise/fall too much relative to the impact of any fundamental event. In such cases, closing positions too quickly at the open may not be optimal. Experience trading in the stock/sector is needed to make accurate judgement calls.

Author: novaliser

I have been trading since 2012, and retired from the corporate world in Dec 2021 after accumulating enough profits to feel comfortable living without a stable monthly income.

Leave a Reply

%d bloggers like this: