Options Traders Brace for Big Earnings Moves from Volatile Steel Stocks

Both AKS and X stocks have made big post-earnings moves in the past

by Josh Selway

Published on Oct 30, 2017 at 1:40 PM
Updated on Jun 24, 2020 at 10:16 AM

Steel companies AK Steel Holding Corporation (NYSE:AKS) and United States Steel Corporation (NYSE:X) are slated to release their third-quarter earnings tomorrow. Both stocks have been volatile over the past year, especially around earnings, and options traders are expecting more of the same this time around. Below, we'll take a closer look at AKS and X ahead of the quarterly updates.

AKS Stock Trading Between 2 Key Trendlines

Shares of AK Steel were last seen down 3.2% at $5.86, putting them slightly above their year-over-year breakeven point, but well below their 52-week high of $11.39 from December. And while the security just took back the 100-day moving average, which served as tough resistance several times since late June, the 200-day moving average has remained out of reach since April.

Last quarter, though, AKS soared the day after earnings, rising 12.4%. This was nothing new for the equity, as it's averaged a single-day post-earnings move of 8% during the past eight quarters. This time around, the options market is pricing in a much bigger move of 13.6%. Such a move, in either direction, would be the stock's second-largest one-day swing over the past year.

Meanwhile, the security has a Schaeffer's Volatility Scorecard (SVS) of 73, an elevated reading that suggests it's shown a tendency to make bigger-than-expected moves on the charts over the past year, compared to what options traders have priced in. Still, going into earnings, AKS open interest resides in just the 21st annual percentile.

Options Volume Light on U.S. Steel

Turning to United States Steel, the stock is also well below its 52-week high of $41.83, last seen trading at $26.52. The shares are down almost 20% in 2017, and are now testing a key level on the charts. Specifically, the $28 level is roughly home to a 23.6% Fibonacci retracement of X's 2016 low to 2017 high, and this price area has served as resistance in September and the shares just reversed lower from there.

Like its sector peer, U.S. Steel has a history of big post-earnings moves, most notable a nearly 27% fall back in April. In fact, X has averaged a single-day post-earnings swing of 10.4% during the past eight quarters, and this time around the options market is pricing in an even bigger 11.2% move.

Looking elsewhere, the equity has an SVS of 84, so the data supports the theory that it has a tendency to make outsized moves on the charts. But options traders are staying on the sidelines, because open interest for U.S. Steel sits in only the 22nd annual percentile.


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