DAL Surges as Vaccine News Boosts Travel Sector

The equity remains down over 39% this year, however

Digital Content Manager
Nov 9, 2020 at 11:17 AM
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The shares of Delta Air Lines, Inc. (NYSE: DAL) are up 12.1% at $35.24 at last check, after Pfizer (PFE) and BioNTech (BNTX) announced its coronavirus vaccine candidate is more than 90% effective in preventing the respiratory virus, and added that up to 50 million doses would be produced to protect roughly 25 million people this year. In turn, a number of travel stocks are surging, including hotels and cruise lines, as investors hope an end to the COVID-19 pandemic may soon be within reach.

On the charts, Delta Air Lines stock has struggled to recover from a May 14, nearly seven-year low of $17.51. The equity has traded mostly sideways for the past several months, while fighting overhead pressure at the $34 mark. Today's surge has helped DAL finally break through that level, however, and reach its highest point since March. This year, the stock remains down 39.6%.

Analysts are optimistic toward the security, with eight of the 12 in question sporting a "buy" or better rating, and the remaining four carrying a tepid "hold."  Meanwhile, the 12-month consensus target price of $38.78 is a 9.9% premium to the stock's current perch. 

Shorts are already hitting the exits, too. Short interest is down 26.6% in the the last two reporting periods, and the 14.72 million shares sold short account for 2.3% of the stock's available float. 

That upbeat analyst sentiment is reflected in the options pits, where calls are popular. This is per the stock's 50-day call/put volume ratio of 2.61 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 77% of readings from the past year. This indicates calls are being picked up at a faster-than-usual clip. 

Today's news is only adding to that optimism. So far, 54,000 calls have crossed the tape -- four times what is typically seen at this point, and more than three times the number of puts traded. The December 40 call is the most popular, followed by the 35 call in the same monthly series.

Now certainly looks like an opportune time to take advantage of DAL's next move with options. The security's Schaeffer's Volatility Index (SVI) of 60% sits in the extremely low 15th percentile of its annual range. In other words, the stock sports attractively priced premiums at the moment.

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