UAL Soars on Revised Outlook, Options Bulls Take Aim

The security sports an impressive 131.3% year-over-year lead

Digital Content Manager
May 25, 2021 at 10:27 AM
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United Airlines Holdings Inc (NASDAQ:UAL) is taking off this morning, after the company said it could see a smaller-than-expected dip in second-quarter unit revenue and core margins, as well as domestic leisure yields for summer travels that are above 2019 levels, as bookings improve across the U.S. This new outlook comes amid easing Covid-19 restrictions and accelerated vaccination efforts. At last check, UAL is up 4.1% at $58.46.

The past year has been a turbulent one for United Airlines stock, though the equity just reached a March 18, annual high of $63.69. And while shares have since cooled off from that peak, the 80-day moving average remains a consistent source of support, and year-over-year the stock sports a 131.3% lead.

Analysts are still mostly pessimistic towards the equity, with eight of the 14 in question carrying a tepid "hold" or worse rating, while the remaining six say "buy" or better. Plus, the 12-month consensus target price of $59.11 is in line with current levels. In simpler terms, this leaves the door open to price-target hikes and/or upgrades going forward.

A short squeeze could create additional tailwinds for UAL. Short interest rose 11.1% in the most recent reporting period, and the 13.16 million shares sold short make up 5.1% of the stock's available float.

Drilling down to today's options activity, 23,000 calls have already crossed the tape, which is four times the intraday average. Most popular is the weekly 5/28 59-strike call, followed by the 58-strike call in the same series, with new positions currently being opened at the former. 

These options traders are in luck, as UAL options are affordably priced at the moment. The equity's Schaeffer's Volatility Index (SVI) of 41% stands higher than only 3% of all other readings from the past year, indicating options players are pricing in lower-than-usual volatility expectations right now.


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