Call players heavily targeted
Delta Air Lines, Inc.
) yesterday, amid the stock's 10.4%
pop. However, not all of the day's call volume was of the bullish
variety, as 86% of the 6,606 contracts traded at DAL's June 17 call
crossed at the bid price. With open interest adding 5,723 positions
overnight, it's safe to assume that a number of these contracts
were sold to open.
By initiating the short calls, traders expect DAL to remain below
the $17 mark through June expiration. If DAL fails to rise the 3.3%
from its current perch at $16.45, the calls will expire worthless,
and the speculators can pocket the initial net credit, which also
represents the full potential profit. As
indicated, traders on Tuesday sold the June 17 calls at a
volume-weighted average price of $0.75. However, with DAL sporting
an impressive 38.3% year-to-date advance, this could also be part
of a larger
, in which shareholders are looking to protect profits against a
Widening the sentiment scope reveals that option traders have been
bearishly aligning themselves toward Delta Air Lines in recent
months. At the International Securities Exchange (ISE), Chicago
Board Options Exchange (
), and NASDAQ OMX PHLX, the stock's 50-day put/call volume ratio of
0.46 ranks higher than 64% of other such readings taken in the past
year. In other words, puts have been bought to open over calls at a
Additionally, the equity's Schaeffer's put/call open interest ratio
(SOIR) of 0.92 ranks in the 95th percentile of its annual range.
Simply stated, short-term speculators have been more put-heavy just
5% of the time within the past year.
As touched upon, Delta Air Lines has put in an impressive
performance on the charts in 2013. In fact, the stock tagged a
record peak of $17.25 on March 21. However, the $17 mark has
emerged as a layer of overhead resistance for the equity, and DAL
has only chalked up one daily close north of it.
In today's session, Delta Air Lines is trading lower, despite
receiving price-target hikes from both
and Imperial Capital this morning. At last check, DAL has shed
This article by Karee Venema was originally published on
Schaeffer's Investment Research
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