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Option Brief: A day after surging nearly 6% on a round of bullish brokerage notes -- as well as support from Oklahoma Attorney General E. Scott Pruitt regarding a potential merger with American Airlines parent AMR Corporation -- US Airways Group Inc (NYSE:LCC) is again on the move. At last check, the stock was up 1.6% to $23.02. Meanwhile, in the options pits, traders are betting on a continued advance for the airline by targeting the weekly 11/29 25-strike call.
Nearly 5,100 contracts have traded so far at that strike. Based on the fact that open interest is negligible, and implied volatility is on the rise, it's safe to say new positions are being initiated. What's more, 100% of the contracts have crossed the tape at the ask price, suggesting the transactions -- including a block trade of 4,500 contracts -- are specifically of the buy-to-open variety.
By buying the calls, today's traders expect LCC to advance beyond $25 by the close on Nov. 29, the day after Thanksgiving -- or about 8.6% over the next five weeks. If the move doesn't materialize within that time frame, the speculators risk parting with their initial cash outlay. As the call is notably out of the money, some of today's trading action could be the result of short sellers hedging their bearish bets. At present, nearly 8% of the equity's float has been sold short.
On the charts, US Airways Group Inc (NYSE:LCC) has been impressive, tacking on roughly 90% year-over-year. What's more, the shares have outperformed the broader S&P 500 Index (SPX) by nearly 33 percentage points during the past two months, ushered steadily higher atop their 10-day moving average.