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Cliffs Natural Resources Inc. Message Board

  • abwlearn abwlearn Aug 14, 2013 3:14 PM Flag

    Would Option trader help me please

    Hi, I don't know much about option. But by looking at the option price and the open interest, the least people can earn money on this Friday(option expire), the price would be at $23.5 or $23. Can anyone give me an answer? I don't play option. I am long. But option expire day price can be very unusual. Also if option expire day stock is down (up), very likely the price will be up(down) on Monday. Thanks in advance.

    Sentiment: Buy

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    • If you are not experienced in option trading, don't trade them.

      Since you have long positions you are holding you can sell covered calls and collect some income. For example you own some shares and would be willing to accept $25 for them, you can sell a $25 covered call that expires in 15 days for about 80 cents. You collect that 80 cents and if the stock closes above $25 at the end of expiration, you will receive $25, no more, no less. If the stock closes below $25, the option expires worthless and you keep your shares. In any case, you keep the 80 cents for selling the covered call. The only way you lose is if the stock goes way above $25 and you just lose profits.

      If you are using Scottrade, they have in house training seminars on options that you should take before jumping into these things.

      I use covered calls to lower my break even points on stocks like CLF. However, if you have a huge run like we have had over the last couple weeks, you can lose profits. That is why I don't sell covered calls on CLF now because it can be up $2 in one day.

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