Cliffs Natural Resources Inc (CLF) Call Buyers Eye a Breakout

Despite a big surge off its recent lows, Cliffs Natural Resources Inc (NYSE:CLF) has run into headwinds near $3

Mar 14, 2016 at 3:20 PM
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Cliffs Natural Resources Inc (NYSE:CLF) is soaring today -- up 15.3% at $2.71 -- on news the mining firm will re-open its Minnesota-based Northshore Mine, which temporarily closed in November. This positive price action has call volume running at a faster-than-usual clip this afternoon, with a number of speculators either betting on or hedging against additional upside through week's end.

Specifically, CLF's March 3 call has seen the most action today, and it looks as if new positions are being purchased. If this is the case, speculators are expecting the stock to move north of $3 by Friday's close, when front-month options expire.

Widening the sentiment scope reveals a distinct call-skewed bias in the equity's options pits. In fact, CLF's Schaeffer's put/call open interest ratio (SOIR) of 0.57 ranks lower than all other comparable readings taken in the past year, meaning short-term speculators are more call-heavy now than they've been at any other point over the last 12 months.

Looking elsewhere on Wall Street, short interest accounts for more than 30% of CLF's available float -- or 12.3 times the average daily trading volume. As such, it's entirely possible speculators are buying to open calls -- particularly those that are out of the money -- to hedge against any additional upside.

On the charts, CLF has more than doubled since hitting a 28-year low of $1.20 on Jan. 12. However, the $3 mark has created headwinds for Cliffs Natural Resources Inc (NYSE:CLF), with the shares only notching one daily close north of here since mid-November.


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