Spirit Airlines Stock Tumbles on New Buyout Offer

Options bulls, however, are still targeting the stock at an elevated clip

Digital Content Manager
Apr 6, 2022 at 10:49 AM
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The shares of Spirit Airlines Incorporated (NYSE:SAVE) are down 6.2% at $25.25 amid news that its board is weighing a cash takeover offer from JetBlue (JBLU) for $3.6 billion. This new offer comes just months after Spirit and Frontier Group Holdings (ULCC) announced a $2.9 billion merger

Several analysts have their doubts about the new offer. Raymond James downgraded JBLU to "market perform" from "outperform" following the news, saying that the deal's "execution risk is greater than that of the proposed Spirit-Frontier merger with dis-synergies likely to precede any meaningful synergy benefits." J.P. Morgan, meanwhile, added that the merits of a merger between Spirit and JetBlue are not "as abundantly clear" as other potential combinations.  

Options traders have taken a much more bullish stance. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), more than 15 calls have been picked up for every put during the past two weeks. This ratio sits higher than 86% of annual readings, suggesting a healthier-than-usual appetite for long calls of late. 

Calls are being favored during today's trading too. So far, 15,000 calls and 5,980 puts have exchanged hands, which is 19 times the intraday average. The most popular position is the April 30 call, followed by the 25 put in the same monthly series, with contracts being opened at both. 

SAVE has seen some rocky trading over the past couple months, though it still clings to an 18.2% year-to-date lead. The stock just recently managed to break back above its 120-day moving average, which has served as both a ceiling and floor for most of the year, though the 320-day moving average continues to keep a lid on shares. 

 

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