Utilizing the POWR Options Approach: A Case Study with Recent RIO Trade

The POWR Options approach of combining fundamental, technical, and implied volatility analysis has recently been exemplified in a trade involving Rio Tinto (RIO). This approach involves identifying relative underperformance in Strong Buy (A – Rated) stocks with the expectation of short-term improvement.

Despite being a Strong Buy rated stock and ranked number 1 out of 33 in the Industrial-Metals Industry, Rio Tinto had been underperforming the Steel Index for months. This underperformance reached an extreme, with Rio Tinto up just over 3% compared to the Steel Index’s almost 21% gain over the same period.

On April 1, technical and implied volatility analysis indicated a good entry point for a trade. The POWR Options trade recommendation was to buy RIO 7/19/2024 $62.50 calls at $5.00. By April 9, Rio Tinto stock had risen about 5%, closing the performance gap with the Steel Index from 17.59% to 12.20%.

The POWR Options approach signaled a close out on April 9 to sell the Rio calls at $6.70, realizing a 34% gain in just 9 days. This demonstrated the leverage options can provide, with the calls rising 7 times more than the stock in the same period.

Not all trades may work out as well or quickly, but the POWR Options approach aims to increase the odds of success. For those interested in learning more about this strategy, they can access a presentation on “How to Trade Options with the POWR Ratings” for the best options trades in today’s market.

Overall, the recent trade in Rio Tinto exemplifies the effectiveness of the POWR Options approach in identifying profitable opportunities in the stock market.