Wednesday, February 22, 2012

United States Steel (X) - Depressed Vol... Or Is It?

X is trading $28.24, down 0.9%, with IV30™ down 1.2% as of ~11:25am EST. The LIVEVOL® Pro Summary is below.


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United States Steel Corporation (U. S. Steel) is an integrated steel producer of flat-rolled and tubular products with major production operations in North America and Europe. U. S. Steel has annual raw steel production capability of 31.7 million net tons (tons) (24.3 million tons in North America and 7.4 million tons in Europe).

This is a vol note again – this time on some depressed vol. Let’s start with the Charts Tab (six months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

We can see a sort of quiet period of late. So much so that the HV20™ has fallen to 47.97%. At the same time, the implied has dipped even further. In fact, with the 52 wk range in IV30™ of [31.11%, 89.56%], the current level is in the 19th percentile (annual). In the last six months, this is a new low.

Let’s turn to the Skew Tab.

I’ve included the Feb weeklies (in red). Ultimately, the skew shape is similar across the two monthly and one weekly expiries, each with a bit of an upside skew to the OTM calls. Other than that, the skew is pretty “normal” looking.

Let’s turn to the Options Tab, for completeness.

I wrote about this one for TheStreet (OptionsProfits), so no specific trade analysis here. We can see the vols are 41.82%, 42.03% and 43.67% for the Feb24 weeklies, Mar and Apr monthlies, respectively. So, the overall vol does rise slightly as we move further out. The next earnings report from X should be in late Apr – but after Apr expiration.

When I expand the vol chart to a full year, I find something a bit less than tasty. I’ve included just the IV30™ and HV20™ chart for a year, below.

I’ve circled the portion from last Apr – Jun. Note that both the HV20™ (the historical realized vol) and the IV30™ were well below the current levels for a sustained period of time. In English, there is recent history of vol at this level that did not in fact rise quickly nor did the underlying move more than the option market reflected.

This is trade analysis, not a recommendation.

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