Cliffs Natural Resources (CLF) PriceWatch Alert Targets 49.89% Downside Protection

Posted: Thursday, March 26, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Cliffs Natural Resources (NYSE: CLF) closed yesterday at $17.64. So far the stock has hit a 52-week low of $11.80 and 52-week high of $121.95. Cliffs Natural Resources stock has been showing support around 16.05 and resistance in the 19.35 range. Technical indicators for the stock are Bearish. CLF appears on the Investors Observer Stocks In The News list. FBR Capital Markets upgraded CLF on Tuesday to Outperform from Market Perform. For a hedged play on this stock, look at a Jan '10 10 covered call (YCP AB) for a net debit in the $8.84 area. That is also the break even stock price for this trade. This covered call has a 296 day duration, provides 49.89% downside protection and a 13.12% assigned return rate for a 16.18% annualized return rate (comparison purposes only). A lower cost hedged play for this stock would use a longer term call option in place of the covered call stock purchase. To use this strategy look at going long the CLF Jan '10 2.50 Call (YCP AD) and selling the Jan '10 10 call (YCP AB) for a $6.95 debit. The trade has a 296 day life and would provide 46.43% downside protection and a 7.91% assigned return rate for a 10.00% annualized return rate (for comparison purposes only). Cliffs Natural Resources has a current annual dividend yield of 2.11%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]