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Option players at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open puts (relative to calls) on Delta Air Lines, Inc. (NYSE:DAL) at an accelerated clip in recent months. This is evidenced by the equity's 50-day put/call volume ratio of 0.46 on this trio of exchanges, which ranks in the bearishly skewed 92nd percentile of its annual range.
In today's session, however, the tables have turned. At last check, calls are trading at a modest mark-up to the intraday average, while fewer puts than expected have crossed the tape. What's more, calls are outpacing puts by a nearly 3-to-1 margin. The stock's declining 30-day at-the-money implied volatility (IV) reveals a preference for longer-term contracts, and in fact, DAL's September 40 call has seen the most action.
Diving deeper, it appears a number of speculators are rolling the dice on a breakthrough of the round-number $40 mark over the next several months. In fact, the majority of the 6,628 contracts traded here have done so at the ask price, IV has edged higher, and volume exceeds current levels of open interest. Summing it all up, there appears to be some buy-to-open activity happening here -- a theory echoed by the ISE, as well as Trade-Alert.
The out-of-the-money calls are being purchased for a volume-weighted average price (VWAP) of $2.64, making breakeven at the close on Friday, Sept. 19 -- when the options expire -- $42.64 (strike plus VWAP). This is just two pennies shy of DAL's record peak of $42.66, tagged on June 5. Gains will accrue with each step north of breakeven DAL takes, while losses are limited to the initial cash outlay. According to the options market, it's a coin toss as to whether this call will be in the money at expiration, per its delta of 0.52.
On the charts, Delta Air Lines has been a standout over the past 52 weeks, with the shares more than doubling in value during that time. Assisting the equity in its trek higher has been its 40-day moving average. This trendline provided a firm foothold for DAL last week, when oil-related concerns pressured airline equities lower. However, a quick bounce from here helped DAL to resume its longer-term uptrend, and heading into the final hour of today's session, DAL was seen 2.2% higher at $39.68.
Off the charts, Delta Air Lines, Inc. (NYSE:DAL) will host its annual shareholder meeting next Friday, June 27. Additionally, the company is slated to report second-quarter earnings the morning of Wednesday, July 23.