Steel Stock Breaks Out After Buyout

X is trading at roughly 13-year highs

Deputy Editor
Dec 18, 2023 at 10:25 AM
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It's official, United States Steel Corporation (NYSE:X) is being bought by Japan-based Nippon Steel for $14.9 billion, including debt. Nippon Steel is buying the company at $55 per share -- a nearly 40% premium to Friday's close -- as it looks to move toward 100 million tons of global crude steel capacity.

Last seen up 26.2% to trade at $49.65, X is heading for its highest close since 2011. The shares are on track for their best single-day percentage pop since Aug. 14 36.8%, and are now nearly 100% higher on the year.

X's options pits are in a frenzy following the news, with total options volume running at six times the intraday average amount. New positions are being bought to open at the most popular contract, the weekly 12/22 50-strike call. 

Today's call run is a deviation from the recent put bias. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put call/put volume ratio of 0.80 that ranks higher than 75% of annual readings.  So while calls still outflank puts on an absolute basis, the high percentile suggests the ratio is on an uptick that nears an annual high rate.

The good news for those looking to speculate, is X options can be had at a relative bargain right now. The stock's Schaeffer's Volatility Index (SVI) of 31% stands in the 18th percentile readings from the past year. In other words, traders are pricing in extremely low volatility expectations on the stock at the moment.

 

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