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Unusual play is bullish on U.S. Steel

Chris McKhann (chris.mckhann@optionmonster.com)

An unusual spread is looking for gains in U.S. Steel as shares trade back to highs from the beginning of the year.

optionMONSTER systems show that a trader bought 20,511 January 23 puts for the ask price of $0.77 against previous open interest of 25,933 contracts. At the same time, he or she sold the same number of January 26 puts for the bid price of $1.99 in volume that dwarfs that strike's open interest of 707, clearly a new position.

This could be a new credit spread that would take in $1.22, which would be the profit if X is above $26 at expiration in mid-January. It could also be a roll, with the trader buying back short puts at the lower strike and rolling the position to the 26 strike. In either case the trader sees shares above $26 in coming months. (See our Education section)

X is up 2.9 percent to $25.59 this morning, its highest level since peaking in January. The steel maker's shares have run up from $17 in early August.

Roughly 77,000 X options have changed hands, 3 times its daily average in the last month.

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