Cliffs Natural Resources Inc (CLF) Sees a Rare Pop in Bullish Betting

Cliffs Natural Resources Inc option players anticipate a bigger bounce

by Andrea Kramer

Published on Dec 29, 2014 at 11:36 AM
Updated on Jun 24, 2020 at 10:16 AM

Cliffs Natural Resources Inc (NYSE:CLF) is on the mend today, up 8.5% at $6.84 -- and on pace to end atop its 10-day moving average for the first time since Nov. 10. What's more, option traders are adopting a relatively rare bullish stance today, buying to open short-term calls to gamble on more upside for CLF.

Already today, the stock has seen roughly 15,000 calls cross the tape -- about four times the norm, and close to three times the number of CLF puts exchanged. Speculators have taken a shine to the equity's weekly 1/2 calls, which expire at Friday's closing bell, with buy-to-open activity detected at the 5, 6.50, and 7 strikes. By purchasing the calls to open, the buyers expect CLF to extend today's bounce and end the week north of the respective strikes.

As alluded to earlier, today's appetite for calls runs counter to the recent trend on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where traders have bought to open more than two CLF puts for every call during the past two weeks. In fact, the equity's 10-day put/call volume ratio of 2.11 sits higher than 94% of all other readings from the past year, pointing to accelerated put buying of late.

Short-term traders are paying up for their CLF options, too. The security's Schaeffer's Volatility Index (SVI) of 88% stands higher than almost two-thirds of all other readings from the past year, suggesting CLF's near-term contracts are rather pricey, historically speaking.

Despite today's uptick, Cliffs Natural Resources Inc remains 74% lower on the year, and plumbed decade lows earlier this month. Furthermore, the stock has underperformed the broader S&P 500 Index (SPX) by more than 41 percentage points during the past three months, so it's no surprise to find that short interest accounts for more than half of CLF's total available float.

Daily Chart of CLF since October 2014 with 10-Day Moving Average

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