X Analysis

United States Steel Corp. (X)

Update 11/1/2017: A announced a 24.0% earnings surprise. The Street estimate was $0.74 per share; the announced earnings were $0.92 per share. Shares gapped up $2.53 at the opening bell, rose another $2 and then declined. I exited early at 71.4% of maximum potential profit, nearly triple my target.

Zacksearnings surprise predictor algorithm anticipated the earnings surprise, producing a 5.97 score in the context of neutral expectations. X also has a high beta of 2.89, nearly triple the movement rate of the S&P 500.

X closed up  $1.98 during the first trading session after earnings were published, well below the maximum move of $8.33 during the past year and the average move of $3.09, but greater than the central tendency of $1.57.

Shares rose by +10.0% during my one-day holding period, or a +3,638% annual rate. The options position produced a 250.0% return for a +91,250% annual rate.


X publishes earnings on Tuesday after the closing bell.

I shall use options that trade for the last time 17 days hence, on Nov.. 17.

Implied volatility stands at 61%, which is 5.9 times the VIX, a measure of the volatility of the S&P 500 index.

X’s IV stands in the 58th percentile of its annual range and at the peak of its most recent broad movement.

The price used for analysis was $25.43.

Zacks has a strong expectation of an upside earnings surprise in the context of a neutral rating, a competitor in the steel industry having had a downside surprise for the quarter, and an uptrend the share price since May. I’m placing reliance on Zacks and the chart trend in my decision to use a bullish directional strategy.

Premium: $0.28 Expire OTM
X-vertical Strike Odds Delta
Puts
Long 23.00 72.0% 23
Break-even 24.28
Short 24.00 62.2% 32

The premium is 28% of the width of the position’s wing.

The risk/reward ratio is 0.9 :1.

The bid/ask spread is 23.3%, wide compared to my single-digit standard, which is based on the iron condor structure. A higher spread is not unusual for verticals.

Decision for My Account

I have entered a position on X as described above. The stock at the time of entry was priced at $25.38.

By Tim Bovee, Portland, Oregon, October 31, 2017

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License
Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.

 

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