How to Play the Nucor Stock Pullback

Options traders have been more bearish of late

Assistant Editor
Dec 16, 2021 at 1:43 PM
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The shares of Nucor Corporation (NYSE:NUE) were last seen 6.8% higher to trade at $115.57. Today's pop comes just one session removed from the equity biggest single-day percentage loss of 2021, with NUE tumbling 8.6% yesterday. Yesterday's pullback brought the steel stock back toward a historically bullish trendline; a trendline that's been quite friendly to the steel stock in the past month. 

Specifically, Nucor yesterday stock came within one standard deviation of its 160-day moving average, after spending a considerable amount of time above this key trendline. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, four similar signals have occurred in the past three years. The security enjoyed a positive return one month later in 67% of those instances, averaging an 8.6% gain.

NUE Chart Dec 16

Options traders have been betting on puts. This is per Nucor stock's 10-day put/call volume ratio at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 0.66, which stands higher than 90% of readings in its annual range. So while calls still outnumber puts on an absolute basis, the high percentile indicates that such a put skew is rare for the last 12 months.

Echoing this is the stock's Schaeffer's put/call open interest ratio (SOIR) which sits in the 93rd percentile of its 12- month range. This means short-term traders have rarely been more put-biased.  

Lastly, it's also worth noting the equity's Schaeffer's Volatility Scorecard (SVS) sits at 94 out of 100. This means NUE has exceeded options traders' volatility expectations in the past year.

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