Most Active Options: United States Steel, Steel Dynamics

X and STLD are lower on a sector downgrade from Citigroup, but both steel stocks remain long-term technical standouts

Jan 19, 2017 at 10:29 AM
facebook X logo linkedin

The 20 stocks listed in the table below have attracted the highest total options volume among mid-cap names during the past 10 trading days. Names highlighted are new to the list since the last time the study was run, and data is courtesy of Schaeffer's Senior Quantitative Analyst Rocky White. Two names of notable interest are basic materials stocks United States Steel Corporation (NYSE:X) and Steel Dynamics, Inc. (NASDAQ:STLD). Here's a closer look at how options traders are lining up on X and STLD.

most active options mid jan 19

X is having a rare down day, after Citigroup lowered its opinion of the U.S. steel sector to "neutral," citing a potential drop in steel prices in the second half of 2017. Regarding the stock itself, the brokerage firm cut its rating to "neutral" from "buy," but boosted its price target to $37 from $21.

Amid the negative attention, X shares were last seen 4.4% lower at $33.38. Long term, however, the stock has been phenomenal, nearly quintupling in value on a year-over-year basis. Today's pullback has X perched atop its 50-day moving average, and a bounce from here could signal the stock has more room to run.

Options traders are certainly counting on it. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), U.S. Steel has amassed a 10-day call/put volume ratio of 1.60 -- in the bullishly skewed 91st annual percentile. Meanwhile, those looking to place short-term options bets are in luck. The stock sports a Schaeffer's Volatility Scorecard (SVS) of 97, suggesting the shares have made much larger moves over the past year than the options market has priced in.

Turning to STLD, the stock has dropped 2% at $36.51, but has still more than doubled from this time last year. Citigroup's only move on the shares was to lift their price target to $43 from $30 -- in all-time-high territory -- without issuing a downgrade. This glass-half-full approach echoes what's being seen across the Street, where nine of 12 analysts rate STLD a "buy" or better, without a single "sell" assessment to be found.

Not to mention, call buyers have been bombarding the steel stock. STLD's 10-day ISE/CBOE/PHLX call/put volume ratio stands at a top-heavy 16.27, outstripping 92% of all readings from the past year. As with X, it's a good time to purchase short-term STLD options, from a volatility perspective, given its SVS of 78.

Of note, Steel Dynamics, Inc. will report earnings next Tuesday evening. Last year, the stock advanced in the session subsequent to these quarterly events three out of four times. In fact, following the company's most recent earnings release in October, STLD tacked on a gaudy 5.2% -- which the aforementioned call buyers would certainly welcome again.

Sign up now for Schaeffer's Market Recap to get all the day's big stock movers, must-know technical levels, and top economic stories straight to your inbox.

Unlock Weekend Profits with Chris Prybal's Favorite Strategy Up +487.5% in 2024

With the markets going left, right, and sideways, you need to have a plan now more than ever. 

Expert Trader Chris Prybal is no stranger to volatility, and has mastered finding big stock rallies while other traders aren't looking over the weekend. Rallies that produced gains like +207% on RTX calls, +236% on MARA calls, and +238% on NET calls.

A few simple moves on Sunday at 7pm could be the “Secret Sauce” your portfolio needs to not just stay afloat, but make unprecedented gains in this turbulent market.

Don’t sit on the sidelines, beat the market with Chris Prybal's strategy. Join him now!