Downgrade Puts Pressure On U.S. Steel Stock, Call Buyers

Options activity on United States Steel has been bullish

Aug 27, 2018 at 2:44 PM
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United States Steel Corporation (NYSE:X) once again showed up on our list of 20 S&P MidCap 400 Index (MID) stocks that saw the most options activity in the past 10 days, compiled by Schaeffer's Senior Quantitative Analyst Rocky White. The highlighted names in the table signify that they're new to the list. As you can see, X call options have outpaced puts by a healthy margin.

most active options august 27

Looking at data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open 2.56 calls for every put, a ratio that ranks in the high 74th annual percentile. It would seem recent options traders have been paying relatively low premiums, too, since the security's Schaeffer's Volatility Index (SVI) of 34% is the bottom percentile of its annual range -- revealing lower-than-usual volatility expectations at the moment.

Anyone bullish on X shares is disappointed today, however, with the stock off 0.9% at $30.66. The down day comes after a bearish note out of Morgan Stanley, which dropped its rating to "underweight" all the way from "overweight," and slashed its price target to $30 from $44. The analyst in coverage noted falling steel prices as a headwind, and that they prefer sector peer AK Steel (AKS) instead.

Even though U.S. Steel is down sharply from its March 1 peak of $47.64 -- and the 20-day moving average is weighing overhead -- most analysts remain on the bullish side. By the numbers, nine of 12 covering brokerage firms have "buy" or better ratings, and the average 12-month price target stands all the way up at $44.21. In other words, there's potential for more downgrades to come if X keeps struggling.

us steel stock chart


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