2 Airline Stocks With Options on Sale

United Continental and JetBlue Airways stocks tend to bounce off their 40-day trendlines

Jun 22, 2017 at 10:47 AM
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Airline stocks are higher in early trading, on news that Qatar Airlines is seeking a substantial investment in American Airlines stock. However, two other aerospace issues could be worthy of your attention, particularly if you're a short-term options trader seeking bullish ideas: United Continental Holdings Inc (NYSE:UAL) and JetBlue Airways Corporation (NASDAQ:JBLU). Below, we'll discuss why UAL and JBLU stocks could be headed even higher in the next month, and why options buyers may want to take notice.

UAL Stock Could Head Back to Record Highs

United Continental shares hit a record high of $83.02 in early June, but have since pulled back to their 40-day moving average. Recent history indicates that when UAL stock comes within one standard deviation of this trendline, following a healthy dose of time above it, the equity tends to rally in the short term. Specifically, after the last eight signals of this kind, UAL was 4.5% higher one week later, with an 88% positive rate, according to data from Schaeffer's Senior Quantitative Analyst Rocky White. One month after a signal, UAL was in the black 71% of the time, with an average return of 4%.


united stock ual chart


JetBlue Stock Could Move Atop Resistance

It's a similar story with JetBlue stock. The shares hit an annual high of $23.37 last week, but have since moved back below familiar resistance in the $23 area, last seen at $22.63. JBLU stock is now within one standard deviation of its own 40-day moving average. One month after the last seven of these signals, JBLU was in the black 57% of the time, with an average gain of 3.01%.

jetblue airways jblu stock chart

UAL, JBLU Options Attractive Right Now

Options traders who expect UAL and JBLU stocks to extend today's momentum in the short term can pick up near-term contracts at a relative bargain. JetBlue sports a Schaeffer's Volatility Index (SVI) of 25%, which is just 2 percentage points from an annual low, indicating short-term premiums are attractively priced right now, relative to JBLU's historical volatility. Likewise, United's SVI of 31% is higher than just 17% of all other readings from the past year.

What's more, JBLU stock has racked up a Schaeffer's Volatility Scorecard (SVS) of 72, indicating JetBlue shares have exceeded options traders' volatility expectations during the past year. UAL's stock's SVS is even higher at 82, meaning the shares have a history of making bigger-than-expected moves on the charts.
 

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