Options Volume Alert: The Unusual Case of U.S. Steel (X)

Posted in Options 
June 6th, 2009

U.S. Steel (NYSE: X) had some unusual options trading on Friday, and this was no close-out trade.  We saw in the PUT OPTIONS which expire on Friday, October 16, 2009 a highly unusual trading pattern in the OCT-2009 $30.00 Strike Puts as options contract trading volume of 20,465 contracts were made.  The prior open interest was only 1,396 contracts.  On a fully leveraged basis this represents just over 2 million shares.  This means that someone is betting for a price of under $30.00 or is buying downside protection for a stop-loss trade at $30.00, and it means that the other side of the trade via the market-maker believes the stock won’t go substantially under $30.00.  Technically, U.S. Steel would have to go under $27.00 based on the premiums paid that were north of $3.00.  There were no off-set trades apparent for the same month, and no options activity in the front months show that this was a roll-out trade.  With a trading range of roughly $16 to $195 over the last year-plus, this is aggressive but may be of less surprise than one might think.

We routinely go back over daily and weekly options to see what we missed out there, and this one stood out of the crowd the largest for our end of week reviews.

-Jon Ogg

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