Call Traders Target Airliners After Acquisition Agreement

It appears JetBlue Airways has won the extended bidding war for Spirit Airlines

Deputy Editor
Jul 28, 2022 at 10:22 AM
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Spirit Airlines Incorporated (NYSE:SAVE) and JetBlue Airways Corporation (NASDAQ:JBLU) are in the spotlight today, after an update in the drawn-out takeover battle between JetBlue and Frontier Group (ULCC). Spirit and Frontier ended their merger agreement on Wednesday, and today it was announced that JetBlue reached a $3.8 billion deal to buy the discount airliner. The merger will likely face scrutiny from regulators, but if approved, would create the fifth-largest airline in the U.S. At last glance, SAVE is up 3.8% to trade at $25.23, while JBLU inches 0.7% higher to $8.46. 

JetBlue stock has struggled to rebound from its July 15 two-year low of $7.87, with overhead pressure at the 40-day moving average. The $8 level appears to have moved back in as support, however. Year-to-date, the equity is down 41%. 

SAVE has fared better on the charts, up 11.2% since the start of the year, though that time has been marked by plenty of volatility. Meanwhile, though shorts have been buying back their bets, with short interest down 42% in the last month, the 5.62 million shares sold short still account for 5.2% of the stock's available float. 

The airliners are seeing plenty of bullish attention in the options pits after the news. SAVE has seen 8,579 calls exchanged so far today -- 11 times the intraday average --compared to just 978 puts. Meanwhile, JBLU calls are running at double what's typically seen, with 3,390 across the tape in comparison to 377 puts. The most popular SAVE contract is the weekly 7/29 26-strike call, expiring tomorrow. 

Both companies are gearing up for their second-quarter earnings reports, too. JetBlue's report is due out before the market open on Tuesday, August 2, while Spirit Airlines is set to announce its results before the open on Tuesday, August 9. Both stocks have a shaky post-earnings past, though, with SAVE finishing three of its last eight next-day sessions higher, and JBLU only two of the last eight. 

 

 

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