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Options Action: US Steel

Monday, 20 Sep 2010 | 5:53 PM ET

US Steel landed in the spotlight Monday after Goldman Sachs downgraded the company saying steel prices will remain range bound.

Considering US Steel has mostly traded between $40 and $50 for the past 3 months, how should you game this stock.

Mike Khouw of Cantor Fitzgerald suggests using options. Following is his trade.

U.S. STEEL (X)
Sell the Jan 41 puts @ 3.10
Sell the Jan 55 calls @ 1.90
Net credit $5.00

***HOW CHAIN MAKES MONEY***
Losses above 60
Between 60 and 55 profits trail off
Get Short at 55
Profit between 41 and 55
Get long at 41
Between 41 and 36 profits trail off
Losses below 36

Learn more about this trade. Watch the video now!

Options Action
Profiting from steel, with Mike Khouw, Cantor Fitzgerald.





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Trader disclosure: On Sept. 20th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Seymour owns (AAPL), (GOOG), (MOS), POT); Terranova Owns (APA), (AAPL), (ARUN), (BMO), (C), (DO), (EOG), (FCX), (FTO), (XBI), (GS), (HES), (IBM), (JOYG), (MA), (NBR), (NOV), (OXY), (ORCL), (PEP), (POT), (RSH), (GLD), (SLB), (SU), (SPLS), (RIG), (UPL), (VRTS); Finerman & Finerman’s firm owns (BBY); Finerman’s firm owns (DAN); Finerman owns (GOOG); Finerman’s firm owns (HPQ); Finerman’s firm owns (IBM); Finerman’s firm owns (POT) and calls; Finerman's firm is short (IJR); Finerman's firm is short (MDY); Finerman's firm is short (SPY); Finerman's firm is short (IWM); Finerman’s firm owns S&P 500 puts; Finerman’s firm owns Russell 2000 puts; Pete Najarian owns (NTAP) call spreads; Pete Najarian owns (POT) call spreads; Pete Najarian owns (RAX) call spreads; Pete Najarian owns (YHOO) ; Pete Najarian owns (GDXJ); Pete Najarian owns (DD); Pete Najarian owns (CNI); Pete Najarian owns (AKAM) call spread; Pete Najarian owns (DCSI) call spread

For Joe Terranova
Terranova is chief market strategist of Virtus Investment Partners, LTD.
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For Daniel Clifton
***No Disclosures***

For Dennis Gartman
***No Disclosures***

For Brian Nagel
Oppenheimer & Co. Inc. makes a market in the securities of (AAPL), (RIMM)

For Gary Shilling
Funds managed by Shilling own U.S. Treasuries

For Brian Marshall
***No Disclosures***

For Ed Mills
***No Disclosures***

For Mike Khouw
Cantor Fitzgerald makes a market in (X)

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  Price   Change %Change
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