Established Covered Calls in Cleveland-Cliffs Inc.

A September 2nd, 2022 Covered Calls buy/write net debit limit order was executed today in Cleveland-Cliffs Inc. (ticker CLF). Five hundred shares were purchased at $17.84 and five Sept 2nd, 2022 $16.50 strike price Call options were sold at $1.62 per share.  The corresponding extrinsic value (i.e. time value) was $.28 per share [$1.62 Call options premium - ($17.84 stock purchase price - $16.50 strike price)].  The $.28 per share will be profit if the stock remains above the $16.50 strike price (and therefore assigned) in two weeks on the Sept 2nd options expiration date.  The Implied Volatility of the Calls was 55.0 when this position was established and the probability that position will be assigned at expiration is approximately 76.8%.  There is no ex-dividend and no earnings report prior to the options expiration date.

With acquisitions completed of ArcelorMittal USA, AK Steel, and Ferrous Processing and Trading Co., Cleveland-Cliffs is now the largest flat-rolled steel producer in North America and is also now vertically integrated from mining through production.  They supply flat-rolled steel to most major auto manufacturers with plants in North America and the majority of their product is sold under fixed price contracts at good margins to Cleveland-Cliffs, so they have substantially less exposure to the dramatic fluctuations in spot steel prices that is more commonplace among their competitors in the steel industry.  

Cleveland-Cliffs' current fiscal year P/E Ratio is estimated at 4.4 which is a very attractive valuation.  Furthermore, the average analysts' target price is $22.12 (+24.0% above today's purchase price). 

Some key numbers for this Cleveland-Cliffs Inc. Covered Calls position are:
Covered Calls Cost Basis: $8,923.35
Profit if Assigned on Expiration Date: $136.65
Days Until September 2nd, 2022 Options Expiration: 15
Absolute Return-on-Investment if Assigned at Expiration: +1.5%
Annualized Return-on-Investment if Assigned at Expiration: +37.3%

Jeff Partlow (The Covered Calls Advisor)
partlow@cox.net