The brokerage firm believes a steel surplus will hurt prices
The shares of AK Steel Holding Corporation (NYSE:AKS) are down 7.7% to trade at $2.05 this morning, and earlier touched a three-year low of $2.04. The new bottom comes after Credit Suisse downgraded the steel stock to "underperform" from "neutral," while trimming its price target to $1 from $3.50. The analyst in coverage believes a surplus in hot-rolled coil steel will impact the company's prices.
Yesterday, AK Steel stock dipped below its year-to-date breakeven level. Since an early April bear gap, the shares have faced pressure from their descending 30-day moving average. Longer term, AKS is headed for its third straight weekly loss, and is now down more than 50% year-over-year.
In the options pits, there's a stronger-than-usual affinity for long calls over puts of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 9,493 AKS calls were bought to open in the past two weeks, compared to just 903 puts. The resultant call/put volume ratio of 10.51 ranks in the 73rd percentile of its annual range
However, AKS is heavily shorted, with the 50.72 million shares sold short representing over 16% of the stock's available float. As such, some of the recent call buying -- particularly at out-of-the-money strikes -- may have been attributable to shorts seeking an options hedge.