Option Investor

New Portfolio Position: CLF "Bull-Put" Spread Projected Gain = $300

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CLF - Cleveland-Cliffs $63.95

Cleveland-Cliffs (NYSE:CLF) produces iron ore pellets in North America. The company manages and owns interests in North American mines; and owns ancillary companies, providing transportation and other services to the mines. It operates six iron ore mines located in Michigan, Minnesota, and eastern Canada. The company manufactures 13 grades of iron ore pellets, including standard, fluxed, and high manganese, for use in its customer's blast furnaces as part of the steel making process. It sells its pellets to integrated steel companies in the United States and Canada. Cleveland-Cliffs was founded in 1847 and is headquartered in Cleveland, Ohio.

The share value of Cleveland-Cliffs has rebounded in recent sessions and on Friday, charting guru Don Worden (Telechart) highlighted the stock as a potential "buy" candidate, based on the heavy-volume rally that emerged from a near-term basing pattern. Our analysis also suggests a bullish future for CLF and readers who agree with that outlook should consider this position.

Fundamentals Chart Earnings Dates Analyst Ratings

PLAY (less conservative - bullish/credit spread):

BUY PUT JUL-55.00 CLF-SK OI=831 ASK=$0.50
SELL PUT JUL-57.50 CLF-SY OI=436 BID=$0.75

POTENTIAL PROFIT (X 10 contracts @ $0.30) = $300
MARGIN REQUIREMENT (X 10 contracts) = $2200
COST BASIS = $57.20


Once the position is open, traders should place a (contingent) order to close the short ($57.50) put options if the stock price moves below $58.50 on an intraday basis. A "net-debit" order of $0.55-$0.60 to exit the entire spread may also be appropriate for some portfolios. Future adjustments to this loss-limit/exit point will be posted in the MCM Newsletter.

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