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United Airlines Stock Grounded Despite Ticket Policy Update

UAL has spent the summer months in a consolidation pattern

Deputy Editor
Aug 31, 2020 at 10:21 AM
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The shares of United Airlines Holdings Inc (NASDAQ:UAL) are down 1% at $36.95 at last check, despite intriguing news that the airline intends to permanently eliminate its ticket exchange fees. Previously, it would cost customers $200 to change standard domestic tickets, but United is rolling it back in an attempt to bring back customers after the pandemic sent the travel sector into a historic slump.

United Airlines stock has been grounded for most of the summer, trading within a tight range between $31 and $40 the last two months. And while the shares have more than doubled off their March 18 eight-year low of $17.80, they remain off 57.6% year-to-date. Additionally, overhead sits the equity's 150-day moving average -- a trendline UAL has failed to topple since January 17.

However, sentiment remains optimistic in the options pits, per UAL's 10-day call/put volume ratio of 3.80 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), that sits higher than 98% of readings from the past year. This underscores the unusually high demand for long calls in the last two weeks.

Shorts are heading for the door, and a continued exodus could push UAL higher. In the last two reporting periods, short interest fell 19.5%, yet the 25.10 million shares sold short still accounts for 9.8% of the stock's available float.  

The good news for those options traders is that the stock’s Schaeffer’s Volatility Index (SVI) of 77% sits in the 20th percentile of all other readings from the past year. This means options players are pricing in relatively low volatility expectations at the moment, a boon for premium buyers.

 

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