Boeing Picks Up Rare Bear Note

BA has struggled since the March 737 crash

Managing Editor
Jun 13, 2019 at 9:51 AM
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The shares of Boeing Co (NYSE:BA) are up 0.2% to trade at $347.68 this morning, after Berenberg trimmed its price target to $415 from $430. Regardless, the brokerage firm does see the aerospace giant able to maintain the same 737 Max production rate through the end of the year. 

Since the fatal 737 Max 8 crash in mid-March, Boeing stock has been carving out a channel of lower highs. For the past two months, the shares have faced pressure from the $360 level, with their 200-day moving average looming just above. Longer term, BA remains stymied by its 12-month breakeven point. 

The majority of analysts have stood by Boeing stock. Of the 16 brokerages in coverage, 10 rate it a "buy" or better, with zero sells on the books. And the consensus 12-month price target of $420.33 is a 21% premium to last night's closing perch of $347.03. 

There's been an increase in this bullish activity in the options pits, as data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows BA's 10-day put/call volume ratio of 1.10 ranking 3 percentage points from an annual high. In other words, option buyers have picked up Boeing puts over calls at a much faster-than-usual pace during the past two weeks.

It's also worth noting that options are incredibly cheap right now. The equity's Schaeffer's Volatility Index (SVI) of 24% sits in the 20th percentile of all other readings from the past year. This indicates near-term option traders are pricing in relatively low volatility expectations at the moment. 

Plus, the security's Schaeffer's Volatility Scorecard (SVS) stands at 92 out of a possible 100. This means BA has tended to make outsized moves over the last year, compared to what the options market had priced in -- a potential boon to premium buyers.


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