Calls Pop on AAL; DAL Earnings in Focus

Call traders are taking on AAL and DAL today

Jul 10, 2019 at 12:34 PM
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American Airlines Group Inc (NASDAQ:AAL) shares are popping today after the company raised its unit revenue forecast. Also helping is a price-target hike to $38 from $35 at Evercore ISI. It would seem options traders are betting on more upside, too, with call volume already flirting with the daily average. Buy-to-open activity seems to be taking place at the weekly 7/12 34-strike call, the most popular contract today. These bulls would be betting on AAL shares rising above $34 by week's end.

At last check the airline stock was up 2% at $33, but was again stopped short at its 160-day moving average, a level of resistance we highlighted last week. Still, call buying has remained the popular options strategy at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). American Airlines' 10-day call/put volume ratio across these exchanges stands at 2.83, showing long calls have almost tripled long puts in the past 10 days.

aal stock chart july 7

Meanwhile, sector peer Delta Air Lines, Inc. (NYSE:DAL) is gearing up to report earnings before the open tomorrow, July 11. The security has quite the streak to live up to, as it's gone without a negative post-earnings reaction in seven straight quarters. This time around the options market is pricing in a 4.7% swing for tomorrow's session, which is actually more than two times the post-earnings move it's averaged in the past two years.

Calls are active ahead of the quarterly report, crossing at three times the expected pace. The weekly 7/12 60-strike call has seen the heaviest volume, while new positions are opening at the 61.50-strike call from the same series. At the ISE, CBOE, and PHLX, the 10-day call/put volume ratio comes in at 3.11, ranking in the 83rd annual percentile, so high levels of call buying has been the trend on DAL.

Delta stock was last seen trading at $59.06, holding near its year-to-date highs. The shares have been holding in a series of higher highs and lows since early June, not trading below their 20-day moving average since June 5.

dal stock chart july 10


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