U.S. Steel Stock Sees Annual High on Acquisition News

Still, analysts are overwhelmingly bearish on X

Deputy Editor
Dec 8, 2020 at 11:15 AM
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The shares of United States Steel Corporation (NYSE:X) are up 6% at $18.23 at last check, on news that the company will acquire the remaining stake of Big River Steel for $774 million. The deal is expected to boost earnings immediately, and combines both companies' technologies while expanding U.S. Steel's talent pool. 

On track for its third-straight session of gains, today's pop has X rising to a new annual high. The security is now up an astonishing 150.8% in the last three months, charging past its pre-pandemic levels with help from a massive bull gap back in November. 

Despite the positive price action, all seven analysts in coverage sport a "hold" or worse rating on U.S. Steel stock, leaving plenty of room for upgrades which could push the stock higher. Furthermore, the stock's 12-month consensus price target of $8.40 sits at a whopping 54.5% discount to current levels. 

Though shorts have started to fall off -- down 12% in the last two reporting periods -- a continued unwinding of short interest could act as a tailwind as well. The 36.61 million shares sold short still make up 21.4% of X's available float, and would take over three days to cover at the stock's average pace of trading. 

Today's news has options traders coming out in droves, with 90,000 calls and 29,000 puts across the tape so far -- three times what's typically seen at this point. The weekly 12/11 19-strike call is the most popular, with new positions being opened there. This means plenty of traders are betting on even more upside for X by the end of the week when these options expire. 

That said, now looks like a good time to weigh in on U.S. Steel options. The stock's Schaeffer's Volatility Index (SVI) of 81% stands higher than 23% of all other readings in its annual range, implying that options players are pricing in relatively low volatility expectations at the moment. 


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