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Option Brief: AK Steel Holding Corporation (NYSE:AKS) hit a new annual high of $7.95 today, after the company announced yesterday afternoon that it will increase the prices of all of its stainless steel products, effective Jan. 1. Meanwhile, call volume is running at about double the average intraday pace.
Seeing notable activity in AKS' options pits is the January 2014 9-strike call, where 1,164 contracts have changed hands. Considering 87% of these contracts went off at the ask price, and implied volatility ticked higher with some of these transactions, the activity here appears to be buyer-driven.
In other words, speculators have placed bets that AKS -- currently trading at $7.90 -- will topple $9 by front-month options expiration in three-plus weeks. However, the equity has not traded north of $9 since Feb. 2012. Still, should the shares remain below the strike price through the close on Jan. 17, 2014, the most the call buyers stand to lose is the initial premium paid.
AK Steel Holding Corporation (NYSE:AKS) -- along with its sector peers -- has done quite well over the past three months, close to doubling in value during this time, amid rising steel prices. Given that short interest still accounts for 26.1% of the stock's available float, however, perhaps some of today's call buyers are actually shorts looking to hedge their bearish bets against another rally.