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Hedging underway in U.S. Steel

David Russell (david.russell@optionmonster.com)

U.S. Steel has made a nice move, and one investor doesn't want to surrender those profits.

optionMONSTER's Depth Charge monitoring system detected the purchase of 41,000 January 20 puts for $2.07 and the sale of an equal number of January 17 puts for $0.87. Volume was below open interest at the lower strike, indicating that an existing position was closed and rolled higher. It was the largest transaction to appear in the option market so far today.

The trader is probably using the contracts to hedge a long position in the iconic steel company. Swapping to the 20s raises by $3 the level at which they have protection, at a cost of $1.20. (See our (See our Education section for more on how to insure your investments with options. )

X is up 0.26 percent to $20.07 in morning trading and 12 percent in the last week. The stock has been ripping higher along with other metals amid increased enthusiasm toward the global economy. It's now back above its 200-day moving average for the first time since February, which could make some chart watchers nervous about a pullback and help explain today's activity.

The transaction pushed overall option volume in X to 8 times greater than average so far today. Puts account for more than four-fifths of the total.

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