Schaeffer's Options Center
Sponsored by:
Schaeffer's Daily Option Blog

Delta Air Lines Optimists Forecast New Highs

Upbeat analyst attention boosts DAL's bullish trading activity

by 12/17/2012 2:13 PM
Stocks quoted in this article:

Bullish bettors have converged on Delta Air Lines, Inc. (NYSE:DAL - 11.35) today, after the stock was upgraded to "buy" from "hold" at Dahlman Rose ahead of the open. As a result, roughly 16,000 calls have changed hands during the course of the session, which is more than double the equity's expected intraday volume. By comparison, just over 4,500 puts have traded.

A large portion of today's call activity has centered around the January 2013 12.50 strike, where nearly 4,400 contracts have traded at a volume-weighted average price (VWAP) of $0.30. The vast majority of these out-of-the-money calls crossed at the ask price, implying they were bought. Since implied volatility has ticked 1.2 percentage points higher today, it's possible that some of this volume is comprised of newly opened positions. By purchasing these calls to open, speculators are betting on the shares to muscle north of $12.80 (strike price plus the VWAP) by January expiration. Such a move would push the stock into new annual-high territory.

From a broader sentiment scope, this upswing in call volume is hardly unusual for DAL. The equity's 20-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) call/put volume ratio checks in at 3.84. Or in simpler terms, calls bought to open have nearly quadrupled puts during the past month.

Meanwhile, short interest on the airline stock rose by more than 7% over the most reporting period, which suggests that short sellers looking to hedge their bets could be contributing to some of the aforementioned buy-to-open call activity. However, DAL's bearish bandwagon is far from crowded, as these shorted shares make up less than 1% of the equity's available float.

In addition to today's bullish brokerage attention, most of the analysts covering the security seem to have high hopes for DAL. The stock sports eight "strong buys" and one "buy" rating, versus two "holds," and not a single "sell" recommendation. Also of note, the equity's average 12-month price target sits at $15.23, reflecting expected upside of nearly 36% to Friday's closing price of $11.22.

This optimism toward DAL isn't surprising, given the stock's year-to-date climb of nearly 41%. The equity has also outpaced the broader S&P 500 Index (SPX) by close to 24 percentage points during the past three months. In fact, the shares are on pace to finish December atop their 10-month moving average, a feat not accomplished since June. A continued move higher over the next few weeks could result in a profit for today's January call players.

At last check, DAL is up 1.2% to hover at $11.35.


permalink

Featured Brokers
ADVERTISEMENT
Unusual Option Volume
Option Flow
ADVERTISEMENT
ADVERTISEMENT
Most Active Stocks
Most Active Option Strikes
Largest Open Interest

Partner Center

© 2014 Schaeffer's Investment Research, Inc. 5151 Pfeiffer Road, Suite 250, Cincinnati, Ohio 45242 Phone: (800) 448-2080 FAX: (513) 589-3810 Int'l Callers: (513) 589-3800 Email: service@sir-inc.com

All Rights Reserved. Unauthorized reproduction of any SIR publication is strictly prohibited.

Market Data provided by QuoteMedia.com | Data delayed 15-20 minutes unless otherwise indicated.