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May 24, 2013  Fri 3:16 AM CT

AKS: SEE CHART GET CHAIN FIND STRATEGIES
A long-term trade is positioned for a sharp move in AK Steel as it sits in the middle of its recent range.

Total option volume in AKS was 8,278 yesterday, almost triple its daily average in the last month. Much of that activity was in one print in the January 2015 2.50 puts.

A trader bought 5,000 of those contracts for $0.58, according to optionMONSTER systems. The volume was well above the strike's previous open interest of 1,189, showing that this is a new position.

Just over a minute later, the session's biggest block of AKS stock traded as 105,000 shares were bought for $3.5552. Combined with the puts, this creates a delta-neutral play that is long volatility.

This means that the trader is looking for a big move up or down and/or for AK Steel's actual volatility to be greater than that implied by the options. (See our Education section)

AKS was down 3.06 percent yesterday, closing at $3.49. The steel maker peaked at $3.78 on Wednesday, its highest price since early March. Shares were above $5 in November but hit a low of $2.76 a month ago.
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The Movement of Delta

In our last column, we spoke about delta. You might remember that we discussed what delta was and what factors affected or changed delta. As you recall, we stated that three factors will have an effect on delta. They were movements of time, volatility, and underlying price. Today, we want to take a further look into the change of delta, this time focusing on change due to the movement in the underlying price. 

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