Traders look for JetBlue to take off


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JetBlue Airways reports earnings next week, and the bulls are piling on board now.

optionMONSTER's Heat Seeker monitoring program detected the purchase of 5,000 May 9 calls for $0.25 and the sale of an equal number of May 8 puts for $0.15. Volume surpassed open interest at both strikes, indicating that new positions were initiated.

The investor will now make money if the airline rallies above $9, but he or she will be on the hook to buy shares if they fall below $8. This combination trade cost just $0.10 to open, so it has the potential to generate significant leverage to the upside or downside. (See our Education section for more on long calls and short puts .)

JBLU is up 4.69 percent to $8.70 in afternoon trading. It rallied sharply in October and November but has been consolidating since. Today's trade lets the investor cheaply position for a breakout from that range without forcing him or her to tie up lots of cash on stock in the meantime. Quarterly earnings on Thursday, April 24, are the next likely catalyst.

While airlines have been one of the strongest groups in the last year, according to our researchLAB market-analysis tool, JBLU has lagged the broader industry. It's up just 19 percent during that time, while Hawaiian, Delta Air Lines, Spirit Airlines, and American Airlines have more than doubled.

Overall option volume in JetBlue is 7 times greater than average so far in the session, with the bullish strategy accounting for almost all the activity.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

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