Options Trading News

May 24, 2013  Fri 3:16 AM CT

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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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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