Analyst Upgrade Sends United Stock Soaring

The majority of analysts following the airline carry "hold" or "sell" ratings

Managing Editor
Dec 20, 2017 at 9:53 AM
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United Airlines parent United Continental Holdings Inc (NYSE:UAL) is moving higher this morning, after Buckingham Research upgraded the shares to "buy" from "neutral." UAL is up 1.9% at $65.63 in early trading, extending a rebound from its Nov. 15 annual low of $56.51.

Currently, the airline stock carries 11 "hold" or "strong sell" ratings from analysts, compared to just five "strong buys." Meanwhile, UAL's average 12-month price target checks in at $73 -- about 11% north of the stock's current level.

In the options pits, United Continental stock sports a Schaeffer's put/call open interest ratio (SOIR) of 1.28, which ranks higher than 99% of all other readings from the past year. This indicates that short-term options traders have rarely been more put-heavy on UAL stock in the last 12 months.

That said, not all of these put positions are necessarily bearish bets. UAL's biggest open interest position is the January 2018 50-strike put, with upwards of 32,623 contracts in residence -- more than doubling open interest of 13,593 contracts at the second most popular UAL option, the January 2018 52.50-strike put. Drilling down on the historical flow data at the January 50 strike shows notable sell-to-open activity here in mid-to-late September, when United shares were trading just below the $60 level.

In other words, it looks as though some UAL put holders are actually neutral-to-bullish premium sellers who are looking for the stock to remain above $50 per share through January expiration. While the airline stock sold off after each of its last three earnings reports, the good news for these put sellers is that UAL's fourth-quarter results aren't due out until the week after front-month options expire.

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