Cleveland-Cliff's Stock Pulls Back, Options Traders Buy The Dip

Cleveland-Cliffs Inc CLF was trading down over 8% at one point Thursday amid overall market weakness following inflation fears stoked by the Federal Reserve’s policy statement.

On Wednesday, JPMorgan helped prop the stock up after initiating an Overweight rating and giving the steel producer a price target of $39. The stock is also popular in a number of Reddit communities and has all the typical characteristics of other recent short squeeze targets such as AMC Entertainment Holdings Inc. AMC and GameStop Corporation GME:

• High levels of ownership: Institutions and insiders own 75.31% of Cleveland-Cliffs' float, with insiders owning 8.88% and institutions owning 66.43%.
• High short interest: As of May 28, 52.48 million, or 12.15% of the stock’s total 454.47 million float, is held short.

Cleveland-Cliffs' options traders weren’t deterred by the pullback in the stock and purchased dozens of calls Thursday totally over $769,456.

See Also: Thinking About Buying Stock Or Options In AT&T, Cleveland-Cliffs Or TAL Education Group?

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of call option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The Cleveland-Cliffs Option Trades: Below is a look at the most notable options alerts, courtesy of Benzinga Pro:

• At 9:50 a.m., a trader executed a call sweep near the ask of 400 Cleveland-Cliffs options with a strike price of $24 expiring on Oct. 15. The trade represented a $127,200 bullish bet for which the trader paid $3.18 per option contract.
• At 10:02 a.m., a trader executed a call sweep near the ask of 250 Cleveland-Cliffs options with a strike price of $35 expiring on Oct. 15. The trade represented a $31,500 bullish bet for which the trader paid $1.26 per option contract.
• At 10:15 a.m., a trader executed a call sweep near the ask of 250 Cleveland-Cliffs options with a strike price of $25 expiring on Jan 21, 2022. The trade represented a $97,500 bullish bet for which the trader paid $3.90 per option contract.
• At 10:35 a.m., a trader executed a call sweep near the ask of 300 Cleveland-Cliffs options with a strike price of $25 expiring on Oct. 15. The trade represented a $79,200 bullish bet for which the trader paid $2.64 per option contract.
• At 11:03 a.m., a trader executed a call sweep at the ask of 288 Cleveland-Cliffs options with a strike price of $24 expiring on Aug. 20. The trade represented a $57,312 bullish bet for which the trader paid $1.99 per option contract.
• At 11:32 a.m., a trader executed a call sweep above the ask of 200 Cleveland-Cliffs options with a strike price of $25 expiring on Oct. 15. The trade represented a $52,000 bullish bet for which the trader paid $2.60 per option contract.
• At 11:35 a.m., a trader executed a call sweep at the ask of 200 Cleveland-Cliffs options with a strike price of $22 expiring on Aug. 20. The trade represented a $48,400 bullish bet for which the trader paid $2.42 per option contract.
• At 11:46 a.m., a trader executed a call sweep near the ask of 363 Cleveland-Cliffs options with a strike price of $20 expiring on July 16. The trade represented a $127,200 bullish bet for which the trader paid $2.20 per option contract.
• At 11:50 a.m., a trader executed a call sweep near the ask of 548 Cleveland-Cliffs options with a strike price of $22.50 expiring on June 25. The trade represented a $27,948 bullish bet for which the trader paid 51 cents per option contract.
• At 12:03 p.m., a trader executed a call sweep at the ask of 200 Cleveland-Cliffs options with a strike price of $40 expiring on Jan. 21, 2022. The trade represented a $31,800 bullish bet for which the trader paid $1.59 per option contract.
• At 12:29 p.m., a trader executed a call sweep near the ask of 402 Cleveland-Cliffs options with a strike price of $24 expiring on Oct. 15. The trade represented a $107,736 bullish bet for which the trader paid $2.68 per option contract.
• At 12:29 p.m., a trader executed a call sweep near the ask of 200 Cleveland-Cliffs options with a strike price of $19.50 expiring on June 18. The trade represented a $29,000 bullish bet for which the trader paid $1.45 per option contract.

CLF Price Action: Cleveland-Cliffs was trading down 6.6% to $21.16 at publication time.