Option Bears Descend on United States Steel Corporation

Put volume is heavy today on United States Steel Corporation (X), with activity ramping up to 159% the usual level. The stock's December 35 put is most active, with 9,097 contracts crossing the tape. Most of these have changed hands between the bid and ask prices, but a 0.5% increase in implied volatility suggests that buyers are responsible for some of these put trades. The December 35 put currently has just 3,361 contracts in open interest, indicating that traders are adding new bearish bets here today.

Also popular is X's January 35 put, where 2,613 contracts have crossed the tape on open interest of 5,765 contracts. Again, the bulk of these puts have traded between the bid and ask prices -- but implied volatility was up 1.1% at last check, pointing to fresh buying activity at this back-month strike. With X at $38.68 this afternoon, both of these 35-strike puts are out of the money.

Today's put-skewed activity is a deviation from the norm for X, which has racked up a 10-day call/put volume ratio of 2.17 on the Chicago Board Options Exchange (CBOE) and International Securities Exchange (ISE). This reading ranks in the 79th annual percentile, revealing that calls have been purchased over puts at a faster pace than usual in recent weeks.

However, some of those calls might have actually been purchased as hedges, since short interest accounts for a hefty 17.5% of X's float. This lofty accumulation of bearish bets represents an 11.8% jump from the most recent reporting period, indicating that the shorts are continuing to build their pessimistic positions. In other words, the apparently bullish sentiment revealed by X's CBOE/ISE call/put volume ratio should be taken with a grain of salt.

From a technical perspective, X's abysmal price action suggests that the momentum lies in the bears' favor. The equity recently breached support from its 10-week and 20-week moving averages, and these two trendlines are now on the verge of completing a bearish cross.

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