CLF Covered Call

September 19, 2023
Adjust Existing Position: Against Cleveland-Cliffs (CLF) Stock Position, Sell the October 15.5 Calls (exp. 10/20) for $0.20 or more.

For months we have been successfully selling covered calls against our CLF stock position. Some months we have picked up “big” premiums of $0.85 by selling at-the-money calls, and other months we have collected “small” premiums by selling out-of-the-money calls.

This month we are going to collect a small amount ($0.20 or more), which I almost look at as a dividend of sorts, via a sale of the out-of-the-money October 15.5 call.

To execute this trade you need to:
Sell to Open the October 15.5 call.

While the $0.20 call sale is not going to allow us to retire tomorrow on the back of these profits, I am not going to sit on this stock position without collecting yield, and in this case we will pick up 1.5% in less than one month’s time.

August 18, 2023
Roll Position: Against CLF Stock, Buy Back the August 16 Call, and Sell the September 16 Call (exp. 9/15).

Today the CLF August 16 call that we sold for $0.85 last month will likely expire worthless. And while I do believe that the call will expire out of the money, because the market is back in suspect territory, let’s buy back that call for $0.01 so that we can then sell the September 16 call for $0.40 (approximately) and again lower our cost basis on our trade that is working well.

To execute this trade you need to:
Buy to Close the August 16 call
Sell to Open the September 16 call

After this adjustment is made, the new position will be:
Long CLF Stock
Short September 16 call

Please note, if you don’t want to pay the $0.01 to close the August call today, and instead would prefer to wait until Monday to sell the September call, that is a fine choice as well. However, because the market is weak, I’m going to aggressively manage this position today.

July 21, 2023
One Trade/One Update: Against CLF Stock, Buy Back the July 16 Call and Sell the August 16 Call (exp. 8/18). Also, Allow BAC Position to Expire.

Today is the expiration of our CLF and BAC covered call positions. Here is how we are going to manage these trades:

CLF will report earnings Monday afternoon after the market close. Because of that, options prices are very expensive in the August expiration cycle. Today let’s buy back the July 16 call that we sold for $0.62, for $0.20, so that we can then sell the August 16 call for $0.90 (approximately).

To execute this trade you need to:
Buy to Close the July 16 Call
Sell to Open the August 16 Call

After this adjustment your position will be:
Long CLF Stock
Short August 16 Call

In terms of BAC, the price of August options isn’t nearly as enticing as CLF. Because of that, should BAC stock close above 31, which is likely, let’s allow our stock to get called away and then we can get involved again if the stock pulls back in the days/weeks to come. You do not need to address this position today.

June 2, 2023
Against CLF Stock Position, Sell the July 16 Call (exp. 7/21)

Today the hot growth stocks are slowing down their momentum and money is moving into the stocks/sectors that have largely chopped around for months. While it’s possible this could be the start of a real rotation, let’s take advantage of today’s strength to sell new calls against our CLF and BAC stock positions.

To execute these trades, you need to:
Against CLF Stock
Sell to Open July 16 Call

For every 100 shares of CLF and BAC you own, you can sell 1 call. For every 200 shares of each stock you own, you can sell 2 calls.

The prices you should be able to get on these call sales are $0.60 on the CLF sale and $0.40 on the BAC call (approximately).

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.