ArcelorMittal (NYSE: MT - option chain) shares are headed higher today after the company announced it may close two of its Siberian coal mines temporarily in order to reduce costs during the economic downturn. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on MT.MT opened this morning at $19.41. So far today the stock has hit a low of $18.54 and a high of $19.49. As of 11:30, MT is trading at $19.09, up 1.41 (8.0%). The chart for MT looks neutral.
For a bullish hedged play on this stock, I would consider an April bull-put credit spread below the $15 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 16.3% return in just two one month as long as MT is above $15 at April expiration. MT would have to fall by more than 21% before we would start to lose money. Learn more about this type of trade here.
MT hasn't been below $15 at all in the past year and has shown support around $16 and $17 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MT.
MT hasn't been below $15 at all in the past year and has shown support around $16 and $17 recently.
Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in MT.
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