Options Trading News

June 24, 2013  Mon 12:21 PM CT

The bears smell blood in U.S. Steel, and they are moving in for the kill.

optionMONSTER's Depth Charge monitoring system detected the purchase of 12,000 October 14 puts for $0.79. A block of 8,000 October 16 puts was sold at the same time against open interest for $1.56, indicating that an existing position was closed and rolled to the lower strike.

Puts lock in where a stock can be sold, which makes them move inversely to the share price. Now that X has fallen, he or she apparently made money in the 16s and is rolling to the lower strike.

The trader collected a credit of $300,000, which may have been their initial investment. He or she also remains exposed to further downside in the Pittsburgh-based metals company. (See our Education for more on how to manage trades with options.)

X is down 4.6 percent to $16.30 in afternoon trading and has lost of 32 percent of its value so far this year. It's been struggling as weak economic growth in countries such as China and India hurt demand for primary materials. Copper has also been under pressure.

The company's next earnings report will probably be in late July, based on last year's calendar, so today's contracts would cover a decline through the release.

Total option volume is quadruple the daily average so far today, with puts outnumbering calls by 2 to 1.
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