Bernie Schaeffer has been a leading expert in technical analysis, market sentiment and options trading; in his The Options Advisor, he reviews two bullish strategies for investors interesting in metals and mining stocks.
Aluminum name Alcoa (AA) is seeing plenty of technical support on the charts. The stock recently pulled back to its 40-day moving average, mirroring its February pullback in which short-term resistance from this trendline preceded a crossover and subsequent strong rally.
Furthermore, this moving average coincides with the equity's round +50% year-to-date level and is just over its 300% year-over-year level.
Despite the positive price action, there is still room for increased optimism amongst analysts. Of the seven in coverage, almost half carry a tepid "hold" rating on the security.
There could be some options-related unwinding set to occur too, considering the stock's total put open interest sits in the 97th percentile of its annual range.
Plus, now is certainly an opportune time to weigh in with options, considering the extremely low volatility expectations being priced at the moment; AA's Schaeffer's Volatility Index (SVI) of 51% sits in just the 1st percentile of its annual range.
Furthermore, the security's Schaeffer's Volatility Scorecard (SVS) sits at a 90 out of 100, meaning AA has exceeded these volatility expectations during the past year.
RECOMMENDATION: In our Aggressive portfolio, we recommend buying the Alcoa August 20, 2021 37-strike call.
Ohio-based mining company Cleveland-Cliffs (CLF) is up 271% year-over-year, with a 39% rise in 2021 to boot. Our recommended selling 17-strike is also the site of CLF’s 80-day moving average, its April pre-earnings close, and the level of a breakout above a trendline connecting lower highs in late March.
Plus, it looks like the stock is heavily shorted right now, and analysts are somewhat pessimistic, making CLF a good bet to play during pullbacks as price action has been strong.
Lastly, Cleveland-Cliffs stock's one-month implied volatility (IV) sits at 69%, which is more than triple the broader market's volatility. This bodes well for sellers of short-term options, as it suggests relatively rich premiums at the moment.
RECOMMENDATION: In our Put Selling portfolio, we recommend selling the Cleveland-Cliffs June 18, 2021 17-strike put.