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A Lesson in Trading Buyouts as Bulls Pounce on US Steel Calls

by | Aug 15, 2023

I want to include a little lesson along with the top flow of the day, a lesson in potential buyouts…

U.S. Steel Corp. saw $563,335 in premium paid for the September monthly $32 strike calls that were about $1.00 a contract — a big bet that I loved!

News broke last week of competing buyouts, and the stock spiked over 40% from under $23 to more than $32 from Friday to Monday!

Esmark Steel Group offered $7.8 billion, or $35 a share to buy U.S. Steel.

So these calls were $1.00 a contract (which is $100 since it’s a dollar for 100 shares), so your breakeven is the share price of $32, plus the $1.00 you paid, so that’s $33 a share.

What’s your max loss? A little over $1.00 since the call traded higher through the day (it was $1.25 a contract at 12:40 p.m. ET). 

Now, the stock won’t go up to $35 exactly, but it could easily go to $34 and change…

So you’re looking at risking $1.00 to make potentially a $1.00 — so doubling your money. 

Let’s say the buyer raises its offer to $40 a share, and that’s where you’d really start to see major gains. 

I hope that helps! 

Tuesday’s Top Order Flow: 

  • U.S. Steel Corp. (NYSE: X): September $32 CALL.
  • Overstock.com Inc. (Nasdaq: OSTK): Aug. 25, $30 PUT.
  • Uber Technologies Inc. (Nasdaq: UBER): Sept. 1, $44.50 PUT.
  • And more!

Note: If no date is listed after the month, it’s the monthly expiration (third Friday). 

*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk. 

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WRITTEN BY<br>Lance Ippolito

Lance Ippolito

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