Call Traders Target Steel Stock Before Earnings

Cleveland-Cliffs Inc (NYSE:CLF) stock is up 4.4% to trade at $9.36 today amid the latest geopolitical updates, heading for its sixth win in the last seven trading session. The shares carry a 29.4% year-to-date deficit and late last month hit its lowest level since July, but don't tell that to options traders.

CLF has shown up on Senior Quantitative Analyst Rocky White's list of stocks that saw the most options volume in the last 10 days. Over this two-week timeframe, the security has seen 813,000 calls and 292,711 puts traded, with the May 10 call attracting the activity. 

The steel manufacturer is just one week away from its first-quarter earnings report, due out before the open on Monday, April 20. The stock has a history of disappointing post-earnings reactions, finishing five of its past eight sessions lower, including a 16.4% drop in February. The options pits are pricing in an 11.1% move this time, regardless of direction, much smaller than the 12% move the CLF averaged in the last two years.

Calls outpace puts on an overall basis, but the latter have been popular of late. This is per CLF's 10-day put/call volume ratio of 0.65 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks higher than 92% of readings from the past year. 

Lastly, the stock sports a Schaeffer's Volatility Scorecard (SVS) of 87 out of 100. In other words, shares have consistently realized higher volatility than its options have priced in over the past 12 months.