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Low Risk Option Play on CF Industries, Inc. (CF) Recent Price Action



December 06, 2012 – Comments (0) | RELATED TICKERS: CF recommends a CF Industries Holdings, Inc. (CF) short-term (7-day) option strategy. Investors could simultaneously:

Sell the December week-two expiration CF $220 call


Buy the week-two expiration $225 call

The difference between funds received and paid out should be an approx $.50 per share credit which we keep if CF Industries closes below $220 on Friday December 14th, but immediately exit the position if it appears the price will end up higher. See Guidelines page at explanation on how trade is set up.


Why we recommend this trade:

At the end of November, CF Industries Holdings, Inc. (NYSE: CF) stock received favorable 'buy' recommendations in several publications including articles in The StreetSeeking Alpha and The Motley Fool. Investors immediately bid CF Industries shares higher after the articles were published. But the stock quickly become overbought and after the month ended traders cashed in quick gains to close the gap up from a week earlier. CF Industries stock price recovered a bit this week and has traded in a very tight range over the past few days. The most recent news is a Piper Jaffray analyst downgrade of CF Industries which will probably restrain the stock from getting back up to recent highs and contain it below the current firm resistance level at around $213. At the very least there is a high probability that the CF Industries Holdings stock will remain below the $220 target for another week.


52-Week High: $227.99

52-Week Low: $128.03

Average Volume (3 month):   954,344

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