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U.S. Steel faces large bearish trade

David Russell (david.russell@optionmonster.com)

U.S. Steel has been hovering, and one trader is worried about a cataclysmic selloff.

optionMONSTER's Depth Charge tracking program detected the purchase of about 9,000 July 20 puts for $0.91 and the sale of an equal number of July 13 puts for $0.135. Volume exceeded the previous open interest at each strike, indicating that they are new positions.

The trade cost $0.775 to open and is highly bearish, earning a profit of more than 800 percent if X closes at or below $13 on expiration. That would represent a drop of almost half for the iconic Pittsburgh-based company. (See our Education section for more on the strategy, known as a vertical spread .)

X fell 3.08 percent to $24.22 yesterday. Shares gained more than 30 percent between early October and early January but have been hovering in a range since then and now appear to be making a lower high.

Although yesterday's put spread could be the work of a speculative bear hoping for the stock to crash, it was probably done by an investor looking to hedge a long position in the name.

Total option volume was almost triple the daily average in the session, with puts accounting for more than two-thirds of the total.

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