Southwest Airlines Stock Nosedives on Earnings Bust

LUV reported a loss of $915 million in net income

Deputy Editor
Jul 23, 2020 at 10:31 AM
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Southwest Airlines Co (NYSE:LUV) took a trip to the earnings confessional today, where the airline company reported a wider-than-expected second-quarter loss. The Airliner also reported a loss of $915 million in net income this quarter, compared to a profit of $714 million a year earlier, and said it expects travel demand to remain in the gutter until a coronavirus vaccine is developed. As a result, the shares of LUV are down 3.1%, last seen trading at $32.28. 

Southwest Airlines stock has suffered on the charts in recent months, dipping to a six-year low of $22.47 on May 14 due to the instability brought on by COVID-19's ongoing assault on the travel sector. Today's dip only added to LUV's 38.3% year-to-date deficit, and has the equity is eyeing its sixth consecutive close below the 100-day moving average.

Long-term, the options pits are surprisingly home to some serious bullish activity. This is per Southwest Airlines stock's 50-day call/put volume ratio of 3.36 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than all but 2% of readings in its annual range, meaning calls are being scooped up at a quicker-than-usual clip. 

Today, however, the options pits are home to ample bearish activity. While calls are still outnumbering puts on an overall basis, 4,672 puts have been ordered up within the first hour of trading -- triple the intraday average and volume pacing in the 98th percentile. Most popular today is the weekly 07/24 32-strike put, followed by the weekly 07/31 30-strike put.

Analyst sentiment hasn't changed much since the last time we checked in on LUV, though 11 brokerages now sport a "strong buy." And for those who may be looking to jump aboard LUV with options, now looks to be an affordable time. Southwest Airlines stocks's Schaeffer's Volatility Index (SVI) of 60% sits in the 23rd percentile of all other readings from the past year -- a boon for premium buyers.

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