Options Trading News

November 4, 2011  Fri 12:22 PM CT

U.S. Steel appears to reversing after a big drop, and one investor is betting on a rip to the upside.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 20,000 January 30 calls for $2.87 and the sale of an equal number of January 35 calls for $1.30, resulting in a net cost of about $1.57.

Known as a bullish call spread, the trade will earn a maximum profit of 218 percent if X closes at or above $35 on expiration. (See our Education section)

X is up 5.31 percent to $27.96 in afternoon trading but has lost more than half its value in the last
year. The stock bounced below $20 level in early October and has been pushing higher since. In the last week it seems to have found support above its 50-day moving average, which could lead some chart watchers to believe that it's reversing after a long decline.

The improvement comes amid continued negativity from steel companies, though X's last earnings report on Oct. 25 was better than expected. (See our new researchLAB service)

Overall option volume in the name is more than double the average amount so far today, with calls outnumbering puts by almost 7 to 1, according to the Heat Seeker.
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I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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