Boeing Stock Flirts With All-Time High After Saudi Deal

Options traders are heavily call-skewed toward BA stock

Managing Editor
Nov 24, 2017 at 10:48 AM
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Dow stock Boeing Co (NYSE:BA) made headlines before the holiday break, after Saudi Arabia agreed to buy $7 billion worth of military equipment and weaponry from multiple U.S. contractors, including Boeing. Below, we will check in with BA to see how the aerospace stock has been faring, and how options traders have reacted to the news.

Boeing stock is currently up 0.3% to trade at $265.91, flirting with the record high of $267.62 it touched on Nov. 8. The shares are boasting an impressive year-to-date gain of 70%, recently guided higher by their rising 40-day moving average. The Dow stock has not traded below this trendline since mid-May.

Despite Boeing's positive price action, analyst opinions remained mixed on BA's long-term potential. Of the 18 brokerages covering the airline stock, 10 rate the shares a "strong buy" or "buy," while eight rate the shares a tepid "hold." Continued success could prompt analysts to re-evaluate their bearish positions. 

In the options pits, calls have been popular. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows BA stock with a 10-day call/put volume ratio of 1.29, which ranks in the 81st percentile of its annual range. This suggests that calls were bought to open over puts at a faster-than-usual rate during the past two weeks.

Digging deeper shows that the January 275 put and call saw the largest increase in open interest during this time frame, thanks to what looks like a synthetic long initiated last Thursday. This means the trader sold to open the puts and bought to open an equivalent amount of the calls, betting on the security to rally above $275 in the weeks ahead.

The good news for options traders is that, regardless of direction, low volatility expectations are currently being priced into short-term BA options, making it a prime time to buy premium. Specifically, its Schaeffer's Volatility Index (SVI) of 16% ranks below 90% of all comparable readings taken in the past year. Furthermore, Boeing has a Schaeffer's Volatility Scorecard (SVS) of 99, indicating BA shares have handily exceeded options traders' volatility expectations in the past year.

 

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