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Portfolio Activity - CLF/COP

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The Sell-Off Continues...

The recent slump in Cleveland-Cliffs (NYSE:CLF) continued this morning with the stock testing yesterday's lows near $56.30. The move gave traders another opportunity to close the long options in the bullish spread (JUN-55P/JUN-57.5P) for a sizable credit, thus offsetting some of the current loss in the spread. We mentioned Thursday that the issue would likely find buying support near $56 in the coming sessions and it was nice to see readers taking advantage of the remaining time-value premium in the long options before it eroded further. Based on the time and sales data, the closing price for the JUN-$55 puts was as high as $1.60 per contract, which substantially reduces the overall drawdown for the position. We offer our congratulations to those who used effective position management to make a bad situation somewhat more tolerable.

Another play that may require some future adjustments is Conocophillips (NYSE:COP). Since Monday, the issue has been in a steady downtrend however the recent spike in crude prices has helped COP's share value stabilize near $58, well above the sold (call) strike price in our calendar spread. If the stock resumes its previous uptrend, the outlook for the position will need to be adjusted to profit from the bullish bias. The simplest alternative would be a transition to a vertical spread, such as the AUG-$55C/AUG-57.5C, for a small debit. The new position would be successful if COP moves laterally or continues higher and although the potential profit is very small, our objective (at this point) is simply to limit losses from the orginal play. We will continue to monitor the issue in the coming week and post additional comments as necessary.

MCM Staff

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