Steel Stock a Favorite Among Call Traders

The stock's 80-day moving average is worth keeping an eye on

Digital Content Manager
Sep 12, 2022 at 11:48 AM
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Cleveland-Cliffs Inc (NYSE:CLF) has made it's way into headlines in recent weeks as the iron and steel company works to reach a new labor agreement with United Steelworkers (USW) for its legacy Mining and Pelletizing operations. It appears a tentative agreement for a 47-month contract was reached last Friday. The agreement will reach roughly 2,000 USW-represented workers, and will begin on Oct. 1.
 
A bull note followed closely behind, with Citigroup lifting its price target to $20 from $17.50 this morning. The equity has barely reacted, however, last seen down 0.4% at $18.63. The stock's 80-day moving average has been a trendline to watch, as it's kept a tight lid on the stock since August. CLF could manage its second-consecutive close above this trendline today, however, as it tries to maintain the momentum of its rally off
the $16 mark.

 

clf sept 12

While today's options activity is relatively quiet, these traders have taken notice of CLF in recent weeks. In fact, the security just popped up on Schaeffer Senior Quantitative Analyst Rocky White's list of stocks on the S&P 400 (IDX) with the highest option volume over the past 10 days. According to this data, CLF has seen 335,951 calls and 168,596 puts exchanged over this time period. The most popular contract was the September 18 call, followed by the weekly 9/9 18-strike call. 

mao sept 12

This penchant for calls appears to be the norm of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 50-day call/put volume ratio of 4.63, which sits higher than 79% of readings from the past year. This means these traders are picking up calls at a quicker-than-usual clip. 

Short-term options players, on the other hand, have rarely been more put-biased. This is per CLF's Schaeffer's put/call open interest ratio (SOIR) of 0.72, which stands higher than 98% of annual readings. 

Short sellers have been jumping ship, shedding 11.5% in the past two reporting periods. However, an additional unwinding of pessimism could put some wind at the stock's back, as the 41.07 million shares sold short make up a strong 8.1% of the stock's available float. 

No matter how you speculate on CLF's next move, options could be the way to go, as premiums are looking affordable right now. The security's Schaeffer's Volatility Index (SVI) of 61% stands higher than just 36% of readings from the past 12 months, suggesting that these players are pricing in low volatility expectations right now. What's more, the stock's Schaeffer's Volatility Scorecard (SVS) stands at 98 out of 100. This means CLF has tended to outperform these volatility estimates. 

 

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