Thursday, March 21, 2013

Cliff's Natural Resources (CLF) - Stock Continues 80% Collapse; Vol Hits Annual Highs

CLF is trading $20.95, up 1.2% with IV30™ up 7.9%. The LIVEVOL® Pro Summary is included below.


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Cliffs Natural Resources Inc. is an international mining and natural resources company. The Company is an iron ore producer and a producer of metallurgical coal.

I found this stock using the real-time custom scan that searches for high vols relative to the short-term and long-term historical realized vol. But this one is also a stock note -- a collapsing stock note.

Custom Scan Details
Stock Price GTE $7 and LTE $70
IV30™ - HV20™ LTE 10
HV180™ - IV30™ LTE -8
Average Option Volume GTE 1,200
Industry isNot Bio-tech
Days After Earnings GTE 10 and LTE 60

The goal with this scan is to identify short-term implied vol (IV30™) that is elevated both to the recent stock movement (HV20™) and the long term trend in stock movement (HV180™). I'm also looking for a reasonable amount of liquidity in the options (thus the minimum average option volume), want to avoid bio-techs (and their crazy vol) and make sure I'm not selling elevated IV30™ simply because earnings are approaching.

The two-year CLF Charts Tab is included below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

On the stock side we can see an equity price that has been tumbling downward for two-years. This was a stock trading over $100 less than two years ago and is now at around $20. More myopically, we can see the drop from $36.61 (2-12-2013) the day before earnings to now in the $20 range, so ~40% in a month.

Let's turn to an isolated vol chart, below (one-year, IV30™)

We can see from the chart that the implied is making new annual highs today and has absolutely exploded from a few weeks ago. Makes sense here, the stock is making new lows and the vol is making new highs.

Let's turn to the Skew Tab, below.

We can see that Apr vol is about equal to May ATM but there is an interesting vol diff expansion to the upside. Or said differently, the vol diff diverges to the OTM calls reflecting greater upside risk (potential) in Apr than May.

Finally, let's look to the Options Tab (below).

We can see Apr monthly vol is priced to 58.89% while May monthly vol is priced to 59.40%. But, looking to the OTM calls, we see a different story. Though not pictured here, the Apr/May 28 call spread shows 10 points higher vol in Apr (70%) than May (60%). Hmmm...

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