Boeing Stock Nosedives Following FAA Investigation

The equity down over 54% year-over-year

Digital Content Manager
Sep 8, 2020 at 11:46 AM
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The shares of Boeing Co (NYSE: BA) are down 4.1% at $164.11 at last check, after the U.S. Federal Aviation Administration (FAA) said it was investigating manufacturing flaws involving some Boeing 787 Dreamliners. Earlier in August, Boeing officials said airlines operating those jets had removed eight from service, as a result of two distinct issues in fuselage sections. In other news, the aircraft manufacturer said it received its first 737 MAX order this year, though it added more cancellations, with deliveries falling 13% in August. 

On the charts, the security has been mostly trading sideways for the past couple of months. Earlier in June, shares attempted a rally to the $234 mark, but those efforts were quickly capped by the 130-day moving average. Now, the security is struggling to overcome overhead pressure at the 50-day moving average, as well as the $180 level -- a far way off from this year's pre-pandemic peak of $349.95 on Feb. 12. Longer term, BA is struggling with a 54.4% year-over-year deficit. 

Analysts are hesitant towards Boeing stock, with 11 of the 17 in coverage carrying a tepid "hold" or worse recommendation, while the remaining six sport a "buy" or better. Meanwhile, the stock's 12-month consensus target price of $174.64 is a 6.8% premium to current levels.

That pessimism is not echoed in the options pits, where calls are popular. The stock sports a 10-day call/put volume ratio of 3.17 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which sits in the highest percentile of its annual range. This suggests a healthier-than-usual appetite for bullish bets of late.

Traders looking to speculate on Boeing stock's near-term trajectory should consider options. The security's Schaeffer's Volatility Index (SVI) of 61% sits in the 19th percentile of its annual range, suggesting short-term options are pricing in relatively low volatility expectations. In other words, the stock's near-term options are attractively priced at the moment.

What's more, the stock's Schaeffer's Volatility Scorecard (SVS) sits at 73 out of 100. This means BA has tended to exceed option traders' volatility expectations during the past year -- a boon for option buyers.

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