United States Steel (X) - Depressed Vol, Earnings Approach
Ophir Gottlieb | Dec 22, 2011 03:00AM ET
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.
This is a vol note, specifically looking a some depressed implied relative to the historical realized measures. Let’s start with the Charts Tab (6 months), below. The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20 - blue vs HV180 - pink).
I actually used to make a market in X, fond memories. Anyway, check out the stock drop from mid Jul – this was a mid 40’s stock and now it’s mid 20’s. Another phenomenon in the stock chart is the relative stability over the last several trading days. Turning to the vol portion, we can see the implied has been dipping since mid Nov, falling from 79.36 to now 56.53. That vol dip has now created a situation where the implied is below both the short- and long-term historical realized vols. Specifically:
IV30™: 56.83
HV20: 83.52
HV180: 65.22
The 52 wk range in X stock is [$18.82, $63.75]. The 52 wk range in IV30™ is [31.11%, 89.56%]. So, while the implied is depressed, it’s still in the 44th percentile for the year.
Let’s turn to the Skew Tab to examine the month-to-month and line-by-line vols.
The next earnings release for X should be in the Feb options cycle. For the last two years earnings were on 1-26-2010 and 1-25-2011. We can see that the Jan expiry is priced below Feb (in vol terms). Both of them show a slightly parabolic skew – no single line seems out of whack.
Let’s turn to the Options Tab.
We can see Jan is priced to 56.83 vol while Feb is priced to 62.16. That Feb vol is still low relative to the historical realized measures.
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I wrote about this one for TheStreet.com (OptionsProfits), so no specific trade analysis here. I will say that the vega in Feb ATM options is interesting given the embedded earnings announcement.
This is trade analysis, not a recommendation.
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