$X bulls make big profits

Option traders have turned big gains on upside positions in U.S. Steel (X).

On May 1, Market Rebellion’s Unusual Activity Service found that 13,000 Weekly $8 calls expiring on May 8 were bought for $0.12 to $0.45 with shares at $7.40. This was clearly fresh buying, as open interest in the strike was 9,781 contracts before the session began.

Those calls traded for as much as $0.85 this morning, more than 3.5 times their average purchase price. The stock rose 18.92% in the same time frame, illustrating the kind of leverage that can be achieved with options.

It is the second winning trade to be posted by Market Rebellion in the names, in just over the past month.

Long calls lock in the price where a 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 was up this morning to trade as high as $8.90 before pulling back to close lower on the day by 2.89% at $8.06. The steel maker beat earnings estimated on its bottom line after the market closed this past Thursday, Apr 30.