Cliffs Natural Resources (CLF) PriceWatch Alert With $18.15 Break Even

Posted: Monday, June 01, 2009 8:07 AM EDT
By: Market Intelligence Center Staff

Cliffs Natural Resources (NYSE: CLF) ended the last trading session at $27.25. 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 25.98 and resistance in the 27.88 range. Technical indicators for the stock are Bullish. CLF appears on the Investors Observer Stocks In The News list. On Tuesday, Merrill Lynch initiated coverage on CLF with a Buy rating and $30 price target. For a hedged play on this stock, look at an Oct '09 20 covered call (CLF JD) for a net debit in the $18.15 area. That is also the break even stock price for this trade. This covered call has a 138 day duration, provides 33.39% downside protection and a 10.19% assigned return rate for a 26.96% 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 7.50 Call (CLF AP) and selling the Oct '09 20 call (CLF JD) for a $10.75 debit. The trade has a 138 day life and would provide 33.03% downside protection and a 16.28% assigned return rate for a 43.00% annualized return rate (for comparison purposes only). Cliffs Natural Resources has a current annual dividend yield of 0.64%. [For more information on these strategies along with more details on possible risks go to www.iotogo.com/HPWAinfo]