Volatile U.S. Steel Stock Sees Heavy Options Trading

X options traders are showing a rare preference for calls today

by Karee Venema

Published on Dec 10, 2018 at 11:28 AM

It's a volatile session on Wall Street today, and United States Steel Corporation (NYSE:X) is no exception. X shares jumped 1% at the open after UBS upgraded the steel stock to "neutral" from "sell," saying its 2018 decline has created an attractive valuation. However, the brokerage firm also cut its price target to a Street-low $22, down from $28, and the equity was last seen down 1.6% at $20.97, fresh off a 17-month low of $20.42.

Options volume is accelerated, too, continuing a trend seen in recent sessions. In fact, X popped up on Schaeffer's Senior Quantitative Analyst Rocky White's list of 20 S&P MidCap 400 Index (MID) stocks that have attracted the highest options volume during the past 10 days, with names highlighted in yellow new to the list. While today's activity is occurring on the call side, U.S. Steel options traders have been unusually put-skewed over the last two weeks.

most active midcap stock options dec 10

At the International Securities Exchange, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), X's 10-day put/call volume ratio of 2.07 ranks in the 96th annual percentile, meaning long puts have been initiated relative to calls at a quicker-than-usual clip. The bulk of this action has centered at the December 22 puts, which were likely bought to open back on Nov. 27, when a speculator rolled down their December 24 puts.

Today, call traders are busier than usual, with 10,000 calls on the tape -- 1.5 times what's typically seen at this point -- compared to just 7,000 puts. The weekly 12/14 21.50-strike call is most active, and it looks like traders are selling to open the options, betting on a ceiling for the steel stock through this Friday's close.

Looking at the charts, U.S. Steel stock is down 56.3% from its March 1 seven-year high of $47.64, with its 10-day moving average ushering the shares to a 9.7% December loss so far. But while the equity is pacing for a roughly 32% fourth-quarter decline, it hasn't finished a week below the round $20 since May 2017.

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