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Option Brief: Steel stocks, at large, are enjoying a nice boost on the charts, after Goldman Sachs upgraded the sector to "neutral" from "cautious" early this morning, stating they "see the sector heading to a sustainable recovery over the coming years." One of the biggest benefactors appears to be AK Steel Holding Corporation (NYSE:AKS), after its personal rating was lifted to "buy" from "sell" at the brokerage firm. AKS has spiked an impressive 9.8% today to trade at $5.05. Meanwhile, in the options pits, call activity has shot up to 11 times the intraday norm, as approximately 21,000 call contracts have crossed the tape thus far. By comparison, around 3,400 puts have been exchanged.
A number of today's call players have made their way to front-month strikes, with the November 5 call garnering notable attention. Here, about 3,300 contracts have changed hands, most of which have done so at the ask price. What's more, implied volatility has ticked higher, and volume exceeds current open interest, suggesting the initiation of long positions.
While the option is now in the money, today's call buyers will not see a profit unless AKS steps 3.6% to the north, allowing the stock to topple the breakeven price of $5.23 (strike plus the volume-weighted average price of $0.23), by the close on Nov. 15. Considering AKS' three-month gain of 48.5% -- along with today's jump -- delta for this option currently stands at 0.54, representing a 54% chance the call will be in the money at expiration.
Elsewhere, United States Steel Corporation (NYSE:X) is also celebrating a rating lift to "buy" from "sell" at Goldman Sachs. At last check, the stock was up 4.4% to trade at $26.91, after earlier tagging an annual high of $27.33.