Steel producer
United States Steel (X) is up 9% over the past year, and has seen some wild swings as a proposed merger was nixed by regulators. One trader is betting shares will trend higher into the middle of next year.
That’s based on the May 16 2025 $50 calls. With 168 days until expiration, 6,000 contracts traded compared to a prior open interest of 271, for a 22-fold rise in volume on the trade. The buyer of the calls paid $2.50 to make the bullish bet.
U.S. Steel shares recently traded for about $39, so they would need to rise by $11, or 28%, for the option to move in-the-money. That strike price is also right at U.S. Steel’s 52-week high of $50.20.
Steel production relies on an economy of scale and low cost power and labor. U.S. Steel has fallen behind globally in recent years, and the past year has seen earnings drop by 60% and revenues slide by 13%.
Action to take: Investors should be cautious here. It’s possible another merger opportunity comes along that regulators would approve. That could lead to a spike higher in shares. But without that, U.S. Steel is already fairly priced.
For traders, the use of call options is perfect for speculating on a merger. Those who expect an offer in the early part of next year may like the May $50 calls, as they could see a big jump on such an offer, and have less downside than buying shares here.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
