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Option Bull Goes Big On Cliffs Natural Resources Inc (CLF)

Credit Suisse warns of a potential short squeeze in Cliffs Natural Resources Inc shares

by 10/22/2014 11:24 AM
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Cliffs Natural Resources Inc (NYSE:CLF) is up nearly 13% today at $9.63, after Credit Suisse warned of a potential short squeeze in the shares. Option bulls have responded, as volume has raced to double the usual intraday level.

A significant portion of the calls traded so far can be traced to a single individual. Specifically, a block of 7,930 weekly 10/31 7-strike calls was exchanged about 45 minutes into the session. It did so near the ask price (at $2.25 per contract), and implied volatility soared 39 percentage points on the transaction, collectively suggesting newly bought bullish bets.

Based on the above, breakeven at next Friday night's expiration is $9.25 (strike plus premium paid), meaning the aforementioned contract is already in profitable territory. Specifically, the bid price on the weekly call has spiked to $2.61 due to this morning's rally, which works out to a $0.36 profit per contract (or about $2,855 total).

It's worth noting that the weekly call encompasses CLF's next earnings report, due out next Monday afternoon. These events haven't always been kind to the shares. In fact, in the session following the company's July and April reports, the stock dropped 2.9% and 4.1%, respectively.

On a longer-term basis, Cliffs Natural Resources Inc (NYSE:CLF) has lagged the market significantly. Year-to-date, the equity is down 63.3% -- even after today's rally -- and has underperformed the broader S&P 500 Index (SPX) by more than 50 percentage points during the previous three months. Earlier this month, CLF also tagged a fresh 10-year low.


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Most Active Weekly Options: Bank of America Corp (BAC)

Bank of America Corp option bulls bet on an extended rally

by 10/22/2014 10:49 AM
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The 20 stocks listed in the table below are the S&P 500 Index (SPX) components that have attracted the highest weekly options volume 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 name of notable interest today is Bank of America Corp (NYSE:BAC), where option traders are eyeing a strong finish to the week.

Most Active Weekly Options Table

Since taking an earnings-induced stumble last week, shares of Bank of America Corp have bounced back nearly 8%. The stock is continuing this momentum today, up 0.2% to $16.64. However, this is not enough to satiate this morning's option bulls, who are eyeing more upside for the financial firm through week's end.

Taking a quick step back, calls are outpacing puts by a nearly 2-to-1 margin thus far, and based on BAC's 30-day at-the-money implied volatility (IV) -- which is up 1.6% at 20.1% -- short-term contracts are in high demand. Most active on the call side is the equity's weekly 10/24 17 strike, where 13,855 contracts have traded. Almost all of these calls have gone off at the ask price, and IV is higher, two indications of buy-to-open activity. This theory is echoed by Trade-Alert.

Amid today's positive price action, delta on the call has risen to 0.15 from 0.10, suggesting an increased probability the option will be in the money at this Friday's close, when the weekly series expires. Should Bank of America Corp (NYSE:BAC) fail to topple $17 by week's end, though, the most the call buyers stand to lose is the initial premium paid.


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The Boeing Company (BA) Option Bulls Bet On a Breakout

The Boeing Company is headed south today despite an earnings beat

by 10/22/2014 10:20 AM
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Despite reporting a third-quarter earnings beat and upping its full-year core earnings guidance, The Boeing Company (NYSE:BA) is sitting 1.7% lower this morning at $125.04 amid concerns over rising costs for its 787 Dreamliner. It was a different story yesterday, when the shares added 2.3% -- a move that prompted option bulls to target the plane manufacturer.

Looking more closely at Tuesday's options activity, overall volume doubled the typical single-session pace, and calls outnumbered puts 27,000 contracts to 21,000. BA's most active strike was the November 130 call, where close to 3,300 contracts changed hands -- mostly at the ask price, suggesting they were purchased. What's more, open interest rose here overnight, signaling fresh bullish bets.

By scooping up the long calls, the traders are wagering on BA to topple the round-number $130 level by the close on Friday, Nov. 21, when front-month options expire. However, the stock hasn't explored this territory since mid-July, with the area rebuffing several advances in recent months. Moreover, delta on the call has sunk to 0.22 from 0.32, following the post-earnings drop.

Taking a step back, The Boeing Company (NYSE:BA) is now sitting on a year-to-date deficit of 8.4%. Plus, the shares are facing potential overhead resistance in the form of their 120-day moving average, located at $127.82.


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Most Active Options Update: Microsoft Corporation (MSFT)

One trader sold to open thousands of Microsoft Corporation puts

by 10/21/2014 2:25 PM
Stocks quoted in this article:

The 20 stocks listed in the table below have attracted the highest total options volume 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 name of notable interest today is Microsoft Corporation (NASDAQ:MSFT), where one options trader is setting a short-term floor.

Most Active Options Table

Microsoft Corporation is grabbing headlines today, as CEO Satya Nadella announced the company will provide (at no cost) its cloud-computing technology and research applications to medical researchers fighting Ebola. "One of the things tomorrow morning we're going to do is make available Azure computer power to the research community," Nadella said. "In addition we have some tools that Microsoft researchers built to be able to do vaccine discovery, so we want to take all of that and make it available for the research community."

On the charts, MSFT has rallied nearly 2% to its current perch at $44.91. Meanwhile, in the stock's options pits, the November 42 put is seeing considerable activity, with roughly 13,500 contracts on the tape -- making it the software name's most active option.

Around noon ET, several large and mid-sized blocks changed hands at the out-of-the-money strike. Based on data from the International Securities Exchange (ISE), it's safe to assume these puts are being sold to open, as the option writer foresees limited potential downside. Specifically, the trader is gambling on MSFT to remain at or above $42 from now through the close on Friday, Nov. 21, when front-month options expire.

Taking a step back, Microsoft Corporation (NASDAQ:MSFT) boasts an impressive 20% year-to-date gain, and is poised to close atop its 10-day moving average for just the second time since late September. Looking ahead, the company will report fiscal first-quarter earnings after the close on Thursday; analysts are expecting a per-share profit of 49 cents.


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NVIDIA Corporation (NVDA) Traders Bank on a Quick Bounce

NVIDIA Corporation options traders are focusing on weekly calls today

by 10/21/2014 1:53 PM
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Short-term call traders are taking aim at NVIDIA Corporation (NASDAQ:NVDA) today, as call volume on the chip stock surges to roughly 18,000 contracts -- representing four times the usual intraday level. The most active option is NVDA's weekly 10/24 18-strike call, where 6,584 contracts have crossed the tape.

Most of these weekly options have traded near the ask price, and open interest at this strike totals just 2,137 contracts. In other words, it looks like speculative players are buying to open new bullish bets here today. By doing so, they're betting on NVDA to rally beyond $18 through the end of this week, when these calls are set to expire.

Shares of NVIDIA Corporation (NASDAQ:NVDA) have rallied 12.7% year-to-date, and they're up 2.8% this afternoon to trade at $18.06. However, there's a looming challenge overhead in the form of NVDA's 200-day moving average, currently docked at $18.23. This formerly supportive trendline was breached earlier this month, and could serve as an obstacle for the stock during the short term.


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