The above companies are only marginally lower today. After adjusting for a drop in the
of over half a percent, as seen by the
SPDR S&P 500 ETF
, the coal-related stocks are essentially flat. This sets up a buying opportunity for long-term investors.
Because this is a long-term play, I especially like selling option premium, so we get paid for our time while lowering our risk. Here is one idea that you may consider.
Option activity for Cliffs Natural Resources has climbed recently, especially this week, and the stock is oversold technically. This sets Cliffs slightly ahead of the pack. But any of the above coal miners are viable candidates.
We can currently sell a November $17 strike put option for about 38 cents. The $17 strike allows over $5 of downside before the writer experiences a decline in profitability. If Cliffs is trading above $17 at the expiration, the entire option premium is profit, a 2.2% gain in 56 days. The trade has an expected 90% chance of being profitable.
At the time of publication the author had no position in any of the stocks mentioned.
This article was written by an independent contributor, separate from TheStreet's regular news coverage.