Cliffs Natural Resources (CLF) 11/12/09 PriceWatch Alert Up To 37.42% Return

Posted: Thursday, November 12, 2009 8:35 AM EDT
By: Market Intelligence Center Staff

Cliffs Natural Resources (NYSE: CLF) closed yesterday at $38.96. So far the stock has hit a 52-week low of $11.80 and 52-week high of $40.21. Cliffs Natural Resources stock has been showing support around 38.15 and resistance in the 40.05 range. Technical indicators for the stock are Bullish. CLF appears on the Investors Observer Stocks In The News list. CLF's board voted to increase its quarterly dividend Tuesday night to 8.75 cents per share, up from 4 cents per share. For a hedged play on this stock, look at an Apr '10 38 covered call (CGJ DR) for a net debit in the $32.76 area. That is also the break even stock price for this trade. This covered call has a 156 day duration, provides 15.91% downside protection and a 16.00% assigned return rate for a 37.42% 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 '11 20 Call (VBP AD) and selling the Apr '10 38 call (CGJ DR) for a $14.80 debit. The trade has a 156 day life and would provide 10.68% downside protection and a 21.62% assigned return rate for a 51.00% annualized return rate (for comparison purposes only). Cliffs Natural Resources has a current annual dividend yield of 0.42%. [THA-Seven Summits Research]