Hello Investors,
There is news circulating around U.S. Steel (X) and a potential buyout from Nippon Steel a Japanese corporation. They are seeking regulatory/Governmental approvals. The market is pricing in a big move one way or the other. We have purchased a very short-term Dec 20th put spread. This is a protective position against our 100 shares of stock. However, it could work as just a speculative trade but understand that the max risk is a very real possibility as the stock will likely surge one way or the other based on the outcome of the negotiations.
Buy to open: X Dec 20th (monthly) 37.00 strike put
Sell to open: X Dec 20th (monthly) 32.00 strike put
Debit: 1.79
Max risk = 1.79 or $179.00 per spread
Max reward = 3.21 or $321.00 per spread
In addition, we discussed our PLTR trade and that an “exhaustion” high would be ideal at current levels. If the stock continues much further, we would need to either exit or roll up the short puts to best manage the position.
Have a great week!