Stocks quoted in this article:
JetBlue Airways Corporation (NASDAQ:JBLU) is up about 3% today to trade at $6.89, despite a lack of notable news drivers. Meanwhile, bullish betting has soared in the options pits, as more than 8,000 calls have crossed the tape so far -- a whopping 27 times the equity's expected intraday volume. By comparison, just 21 puts have changed hands.
Snagging the lion's share of the action is the October 7 call, where more than 6,200 contracts have been exchanged. The majority of the calls traded in one large block for an ask price of $0.15 each. Since this strike is home to just 1,355 contracts at the moment, it's likely that new bullish positions are being created here. What's more, data from the International Securities Exchange (ISE) corroborates this theory.
By purchasing the out-of-the-money calls to open, the block trader is wagering that JBLU will muscle north of $7.15 (strike price plus the premium paid) by front-month expiration. This would entail a rise of 3.4% from the stock's current perch, as well as a level not conquered on a daily closing basis since April 24. At last check, the delta for this option was docked at 0.42, implying it has a 42% chance of moving into the money ahead of the close on Oct. 18.
Should the passenger airline stay south of the strike price between now and then, the most the speculator stands to lose is the initial cash outlay. Even more reassuring, the stock's Schaeffer's Volatility Index (SVI) of 33% ranks lower than all but 33% of similar readings taken during the past year. In other words, the security's near-term options are relatively inexpensive right now.
Technically, JetBlue Airways Corporation (NASDAQ:JBLU) has advanced about 20% year-to-date, and nearly 39% on a year-over-year basis. It bears mentioning, however, that short interest accounts for 20.4% of the stock's float -- or close to 17 days' worth of pent-up buying demand, at JBLU's average pace of trading. This suggests that today's call buyer could possibly be a skeptic looking to hedge his bearish bets.
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