Short-term calls spike in U.S. Steel

U.S. Steel drew call buying in several strikes early this week, and those positions are already paying off.

On Monday, Investitute’s market scanners showed that 4,300 Weekly 20.50 calls expiring tomorrow were purchased for $0.48 to $0.95 with shares at $21.23. These represented new positions, as their volume was far above the strike’s open interest of 2,332 contracts.

Those calls traded up to $1.80 today, more than doubling in value just four sessions later. The stock was up less than 4.5 percent in the same time frame, illustrating the kind of leverage that can be obtained through options.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

X rose 4.7 percent to $21.85 today. The steel maker has rallied on a positive report yesterday by JP Morgan, which said that criticism of the company had been overblown.