Stocks quoted in this article:
The 20 stocks listed below are the members of the S&P MidCap 400 Index (MID) that have seen the highest total options volume (calls and puts combined) during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. One equity seeing action on the put side of the fence is mining concern Cliffs Natural Resources Inc (NYSE:CLF).
CLF is benefiting from sector strength today, and has tacked on 4.3% to rest at $20.82. Nevertheless, put volume is running at more than twice the usual pace, and has exceeded call volume by a hefty margin. It seems, however, that not all of this put trading is of the traditional bearish variety.
Around 1:30 p.m. ET, symmetrical blocks of 1,750 puts traded at the April 19 and June 19 strikes. It appears as though the front-month puts may have been purchased to close, while the June puts were sold to open. Effectively, the trader may be rolling out his short put position to capture additional premium ahead of April options expiration.
If CLF stays north of the 19 strike through the put contract's expiration, the put seller keeps the premium as profit. Should the stock dip beneath this threshold, the put seller may be assigned and forced to purchase the stock for $19 per share (less the premium collected). CLF last closed south of $19 as recently as March 20, so perhaps today's move is to provide a little "wiggle room" before the contracts expire.
Also garnering its fair share of attention is the May 14 put, which has seen more than 4,600 contracts change hands. The lion's share of the volume traded at the ask price, and implied volatility has popped 6 percentage points higher, which are together suggestive of buy-to-open action. Because the puts are out of the money by more than 30%, the put buying could be the work of shareholders hedging against a significant short-term drop in the shares.
Panning back, put buying has been a popular strategy in recent weeks. Cliffs Natural Resources has racked up a 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.94, which stands at an annual high. In other words, long puts have never been in greater demand (relative to long calls) during the last year.
Outside of the options pits, Cliffs Natural Resources Inc (NYSE:CLF) is tentatively scheduled to report earnings later this month. The company has topped bottom-line expectations in three of the last four quarters, subsequently racking up an average day-after gain of 8.5%.