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CLF Covered Call

April 24, 2023
Adjust Existing Position: Against Cleveland-Cliffs (CLF) Stock, Sell the May 17 Calls (exp. 5/19) for $0.45 or more.

On Friday the CLF April 17 call that we sold for $0.82 expired worthless. Today, ahead of earnings after the market close, let’s sell the May 17 call for $0.45, which will reduce our cost basis on the position to $15.94 (approximately).

To execute this trade you need to:
Sell to Open the CLF May 17 Call

For every 100 shares of CLF stock you own, you can sell 1 call. For every 200 shares you own, you can sell 2 calls. And so on …

Here is the earnings breakdown for tonight’s announcement:

CLF – With the stock trading at 16, the options market is pricing in a move of $1 this week, or 15 to the downside and 17 to the upside.
Open interest is skewed bullish on a ratio of 1.3:1 call vs. put.
Skew is pricing in typical downside concerns as well as upside interest.

April 6, 2023
Covered Call: Buy Cleveland-Cliffs (CLF) Stock and Sell the April 17 Call (exp. 4/21/2023) for a net price of $16.45 or less.

This morning a trader/traders are aggressively buying CLF calls. Here are those trades:

Buyer of 20,000 Cleveland Cliffs (CLF) May 20 Calls for $0.34 – Stock at 17

Buyer of 20,000 Cleveland Cliffs (CLF) June 20 Calls for $0.65 – Stock at 17.

Let’s sell this elevated options volatility ahead of the long holiday weekend and ahead of earnings which are not in the April expiration cycle.

To execute this trade you need to:
Buy CLF Stock
Sell to Open the April 17 Call

The most you can lose on this trade is $1,645 per covered call if CLF were to go to zero.

The most you can make on this trade is $55 per covered call if CLF were to close above 17 on April expiration (a yield of 3.34% in two weeks’ time).

The breakeven on this trade is at 16.45.

Stepping back, CLF stock looks pretty suspect. That being said, the call activity is intriguing, so I will get involved with a mostly directionally neutral position.

Position (Original) CLF April 17 Covered Call
Position StrategyCovered Call
Opened DateApril 6, 2023
ExpirationApril 21, 2023
Net Price16.39
Jacob Mintz is a professional options trader and editor of Cabot Options Trader. Using his proprietary options scans, Jacob creates and manages positions in equities based on unusual option activity and risk/reward.