U.S. Steel has bounced smartly, but yesterday the bears came
back to the name.
optionMONSTER's Depth Charge monitoring program detected the
purchase of about 13,800 June 19 puts for $1.20 and the sale of an
equal number of June 16 puts for $0.21, resulting in a net cost of
about $0.99. Volume was below open interest in the 16s, so there
are two possible explanations of the trade.
One is that traders had previously owned puts at the lower strike
and adjusted to the June 19s after the stock climbed, making
another bet on the bearish side.
Alternatively, both halves of the trade could have been opened, in
which case it was a
. That strategy would control a drop from $19 to $16, returning
more than 200 percent if such a move occurs. (See our
section for more on how options can be used to generate leverage to
the upside or downside.)
X fell 0.57 percent to $19.15 yesterday but is up 12 percent in the
last week. The shares have been rising along with other metal
companies as sentiment improves toward the global economy, but it
still faces bearish momentum.
The last earnings report on April 30 missed expectations on the top
and bottom lines amid weak spot prices for flat-rolled steel.
Total option volume was almost twice the daily average in X
yesterday, with puts outnumbering calls by 3 to 1.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.
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