US Steel (NYSE: X) shares are trading higher after competitor Nucor (NYSE: NUE) raised its earnings outlook for its upcoming second-quarter earnings. The previous forecast of 1.55 to 1.60 was lifted by 20 cents to 1.75 to 1.80. Analysts were looking for 1.69 and an upside surprise by NUE should signal good things for X as well. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on X.

After hitting a one-year low of $74.41 in August, the stock hit a one-year high of $185.55 last month. X opened this morning at $177.00. So far today the stock has hit a low of $175.25 and a high of $182.22. As of 12:55, X is trading at $183.10, up 9.88 (5.7%). The chart for X looks bullish but deteriorating slightly, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $140 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 6.4% return in just seven weeks as long as X is above $140 at July expiration. US Steel would have to fall by more than 23% before we would start to lose money. Learn more about this type of trade here.

X hasn't been below $140 since March and has shown support around $170 recently. This trade could be risky if the stock has risen too quickly and has a correction, but even if that happens, this position could be protected by the support the stock might find at $150, where it formed a bottom in May.

Brent Archer is an options analyst and writer at Investors Observer.

DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in X or NUE.