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Option Brief: American Airlines Group Inc (NASDAQ:AAL) shed 4.4% yesterday, after Imperial Capital downwardly revised its earnings estimate for the company. This negative price action is continuing today, with shares of AAL off 0.6% at $35.06. Although the stock is testing support at the $35 level in early trading, a number of option traders remain hopeful about this technical foothold.
Already today, AAL call volume has soared to more than two times the intraday average. Eight of the 10 most active strikes are of the short-term variety, which earlier sent the stock's 30-day at-the-money implied volatility (IV) to its highest reading on record. AAL's April 35 call has seen the most action thus far, where 3,904 contracts -- including a block of 2,473 -- have changed hands.
Nearly all of this action has occurred on the ask side and IV is 3.5 percentage points higher, pointing to buy-to-open activity. This theory is echoed by Trade-Alert. It's a flip of the coin as to whether this call will enjoy an in-the-money finish at next Thursday's close, which is when front-month options expire, as its delta is docked at 0.50. Should American Airlines Group Inc (NASDAQ:AAL) fail to hold $35 through expiration, the most the speculators have on the line is the initial premium paid.