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Option Trends: AK Steel and U.S. Steel

Calls are popular on AKS, but traders prefer puts on X

by 12/3/2012 1:16 PM
Stocks quoted in this article:

Speculative investors have set their sights on commodity stocks AK Steel Holding Corporation (NYSE:AKS - 3.94) and United States Steel Corporation (NYSE:X - 21.66), according to volume data from the major options exchanges. Calls have emerged as the options of choice on AKS, while puts are dominating the action on X. Here's a closer look at the latest trends in the options pits for these two hot stocks.

Beginning with AKS, options traders on the International Securities Exchange (ISE) and Chicago Board Options Exchange (CBOE) have bought to open 3,376 calls during the past five sessions, compared to only 100 puts. In other words, speculators have snapped up 33.76 times more calls than puts over the course of the last week.

AKS monthly price chartFrom a slightly broader view, AKS sports a 10-day call/put volume ratio of 7.75 on the ISE, CBOE, and NASDAQ OMX PHLX (PHLX). This ratio registers in the 82nd percentile of its annual range, suggesting that speculative players have bought to open calls over puts at a faster clip only 18% of the time during the past year.

However, it's worth noting that 32.2% of the equity's float is sold short -- which raises the possibility that traders have been buying calls to hedge their shorted shares, rather than to bet bullishly on AKS. On the charts, the stock has dropped 51.5% year-to-date, and it's currently staring up at familiar resistance from its 10-month moving average.

As for sector peer X, traders have taken a shine to the stock's put options. Over the past five days, speculators on the ISE have bought to open 12,271 puts, compared to only 2,451 calls. The resulting five-day put/call volume ratio of 5.01 highlights a distinct preference for bearishly oriented options. Likewise, X's 10-day ISE/CBOE/PHLX put/call volume ratio checks in at 1.57, in the 98th percentile of its annual range. This elevated rank reveals that traders have shown a greater preference for puts over calls just 2% of the time during the past year.

Similar to AKS, the shares of X have also attracted a substantial following among short sellers. Short interest accounts for 25.7% of the stock's float, or 4.2 times X's average daily trading volume. Technically speaking, though, X has held up somewhat better than AKS in 2012, down just 18.5% since the start of the year.


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