Options Volume Skyrockets on Soaring Steel Stocks

STLD and X stocks are attracting eleventh-hour options traders amid plans to curb imports

Feb 16, 2018 at 12:41 PM
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Steel stocks are skyrocketing this afternoon, after the Commerce Department recommended the Trump administration impose steep tariffs and quotas on imports of steel and aluminum. Against this backdrop, options volume is skyrocketing on a handful of domestic steel producers, including Steel Dynamics, Inc. (NASDAQ:STLD) and United States Steel Corporation (NYSE:X).

STLD Attracts Eleventh-Hour Option Bulls

STLD stock is just off a fresh all-time high of $49.34, last seen 4.2% higher to trade at $49.16. Another gain today would be the equity's sixth straight, with Steel Dynamics shares pacing for a weekly gain of 11.8% -- their best week since November 2016.

Call options on STLD have been flying off the shelves, with nearly 6,000 traded so far -- six times the average intraday pace, and about 10 times the number of puts exchanged. More than half of the action transpired at the soon-to-expire February 48 call, where it looks like some bulls are buying the options to open to speculate on more eleventh-hour gains for Steel Dynamics shares.

Today's appetite for calls is just more of the same for the security, though. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio of 14.88 is in the 91st percentile of its annual range. This indicates that STLD options traders have bought to open calls over puts at a much faster-than-usual clip in the past two weeks.

U.S. Steel Eyes Best Week Since Election

U.S. Steel stock was last seen 10.7% higher to trade at $43.16, and earlier notched a three-year peak of $43.97. X shares are also tracking for a six-day winning streak, and have advanced more than 28% so far this week -- eyeing their best week since the presidential election.

Roughly 88,000 X call options have traded so far today -- seven times the average intraday pace, and more than twice the number of puts exchanged. The February 40 and 41.50 calls have attracted the most attention thus far, most of which occurred since 11 a.m. ET -- just before Commerce Secretary Wilbur Ross's scheduled 12 p.m. ET press conference. Volume has exceeded open interest at both strikes, pointing to at least some eleventh-hour trades being initiated ahead of February options expiration tonight.

Unlike STLD, though, today's affinity for U.S. steel calls runs counter to the growing trend seen on the major exchanges. Specifically, X's 10-day put/call volume ratio of 0.77 is in the 93rd percentile of its annual range, pointing to accelerated put buying over call buying in the past two weeks. As the shares extend their quest for new highs, an unwinding of pessimism in the options pits could add fuel to X stock's fire.



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