Short-term bulls overwhelmed
Delta Air Lines, Inc.
) options pits yesterday. Of the 16,000 calls traded throughout the
course of the session, 5,381 crossed at the near-the-money June 19
strike for a volume-weighted average price (VWAP) of $0.23. The
majority of the contracts went off at the ask price, implied
volatility ticked higher, and open interest added 1,996 positions
overnight, collectively insinuating heavy buy-to-open activity.
For this play to be profitable at expiration, DAL has to march
north of the breakeven price of $19.23 (strike price plus the VWAP)
-- which is $.20 below its all-time high of $19.43 reached on May
15. If the stock fails to make the 2.6% step by the close on June
21, when front-month options expire, yesterday's call buyers will
stand to lose the initial premium paid per contract.
This anticipated leap is possible, considering since hitting its
annual bottom of $8.42 on September 4, DAL has rebounded an
impressive 123% to its current price of $18.75. Moreover, the
option's delta currently rests at 0.39 or 39%, representing a
2-in-5 chance of finishing in the money by expiration.
In DAL's options pits overall, speculators during the past 50
bought to open more than five calls for every
, according to the stock's International Securities Exchange (ISE),
Chicago Board Options Exchange (
), and NASDAQ OMX PHLX (PHLX) 50-day call/put volume ratio of 5.38.
This ratio ranks in the 84th percentile of other such readings
taken within the last year, meaning speculator's appetite for calls
over puts has been healthier than usual as of late.
Outside the options pits, bullish sentiment for Delta Air Lines
runs high, as well. In fact, seven of the nine analysts weighing in
on the stock endorse it as a "strong buy," while only two give it a
"hold" or worse recommendation. Likewise, analysts' consensus
12-month price target stands at $22.29, meaning the brokerage bunch
expects DAL to climb to new heights within the next year.
This article by
was originally published on
Schaeffer's Investment Research
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