$X puts forge profits

Option traders have turned big profits on downside positions in U.S. Steel (X).

On May 25, Market Rebellion’s Unusual Option Activity Service found that 10,000 July $23 puts were bought for $1.68 with shares at $24.42. This was clearly fresh buying, as the open interest in the contract before the activity appeared was just 1,824.

Those puts traded for as much as $6.45 this session, more than 3.5 times their purchase price. The stock fell 31.78% in the same time frame, illustrating the kind of leverage that can be achieved with options.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

X was down 4.97% this session to close at $17.02.