Unusual Options Activity: United States Steel (X)

Metal producer United States Steel (X) is up nearly 48 percent over the past year, far beating the overall market. One trader is betting on shares to move higher in the next month.

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  • That’s based on the November 24 $33 calls. With 31 days until expiration, 10,313 contracts traded compared to a prior open interest of 534, for a 19-fold rise in volume on the trade. The buyer of the calls paid $1.15.

    Shares recently traded for just under $32, so they would need to rise about 3.5 percent, or $1, for the option to move in-the-money. The strike price of $33 is just under the stock’s 52-week high of $33.65.

    U.S. Steel has seen some upside jumps over the past year, in part as the company rejected a buyout offer.

    While shares have been on the rise recently, the slowing commodity market of the past year has slowed performance. Revenues are off 20 percent, and earnings are down 50 percent.

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  • Action to take: Shares are going for about 6 times earnings, and trade at about a one-third discount to their book value.

    Investors could see upside here, especially if a higher buyout offer comes in. U.S. Steel also has a 0.6 percent dividend at the moment.

    For traders, the November calls don’t have much time to play out. But they could see a big jump on a buyout offer, or simply on a market rebound from the recent selloff. The options can likely see mid-double-digit returns in the coming weeks.


    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 of the companies mentioned in this article.

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