A Burning Interest in Coal

There is nothing wrong with sitting on your hands. Heck, enter an all-you-can eat wings contest for the next two hours. I'm not doing much. If anything, I am looking to take trades off the table from the recent action, both winners and losers. I am perfectly content waiting until the Fed announcement is done and we see the trading for the first 15 to 30 minutes afterward.

Coal was hit with a pair of downgrades this morning, and Cliffs Natural Resources (CLF) and Peabody Energy (BTU) were the victims. One key takeaway from the CLF downgrade was the fact the analyst commented that a liquidity event was not a concern. We've heard this about CLF and Walter Energy (WLT). Sentiment is terrible. In fact, it is so terrible that I've heard bankruptcy rumblings, but I have not seen it in the options action or debt trading. From these levels, I still believe coal is going to be a second-half winner. Furthermore, I like the action in CLF as shakes off the downgrade. I am buying the stock and adding an options play. For every 100 shares of stock, I am also buying 1x June $18.50 call and selling 2x June $19 calls for $18.45 total....129 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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