Stocks quoted in this article:
US Airways Group, Inc.
this morning reported another decline in mainline traffic in January, though the airline issue said passenger revenue per available seat mile improved about 2%. Following the news, the shares of LCC have ticked lower so far today – which could bode well for one back-month option trader.
More specifically, yesterday morning, a block of 2,000 March 6 calls crossed the tape for the bid price of $0.50, suggesting they were likely sold. In addition, call open interest at the March 6 strike ticked higher overnight, pointing to potential sell-to-open activity. In fact, the 6 strike is now home to peak call open interest in the back-month series, with roughly 13,300 contracts in residence.
By writing the March 6 call to open, the seller is betting the shares of LCC will finish beneath the $6 level by the time March-dated options expire. In this best-case scenario, the call will expire worthless, allowing the bearish bettor to keep the $0.50 received at initiation.
On the flip side, LCC's February 6 call also attracted quite a bit of attention yesterday, with nearly 1,500 contracts exchanged – 78% of which traded at the ask price, indicating they were likely purchased. By buying the February 6 call to open, the investor is expecting the shares of LCC to topple the $6 level by front-month options expiration.
At last check, it's a good old-fashioned nail-biter, with the airline concern surrendering 2.9% to flirt with the $5.80 region.