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February 27, 2013  Wed 12:22 PM CT

X: SEE CHART GET CHAIN FIND STRATEGIES
One investor is determined to make money in U.S. Steel.

optionMONSTER's Heat Seeker monitoring system detected the purchase of about 5,000 May 22 calls for $1.29. Two minutes late some 10,000 April 25 calls were sold for $0.21, but volume was below open interest.

This indicates that the trader previously owned the April 25s in hopes of a rally but is apparently worried that it might take longer to occur. He or she now has an additional month of upside exposure while lowering the strike price.

The resulting position will provide more leverage to the upside over a longer time frame. The investor paid $435,000 to make the switch. (See our Education section)

X is up 1.79 percent to $21.08 in afternoon trading but is down 11 percent so far this year. The stock been trying to climb since last summer but recently has been hitting resistance at its 200-day moving average.

Total option volume is almost twice the daily average so far in the session, with calls outnumbering puts by more than 4 to 1.
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Sweet Spot Exceptions

As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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