Airline Stock Grounded as Travel Demand Cools

Options bulls are viewing today's dip as an opportunity

Fernanda Horner

Digital Content Manager

Oct 26, 2023 at 10:30 AM

Southwest Airlines Co (NYSE:LUV) stock is down 2.9% to trade at $22.91 at last check, after the company reported worse-than-expected third-quarter revenue. Though profits met analysts' estimates, cooling demand is prompting the airline to slow capacity growth next year.

The security is today trading at its lowest level in more than three years, with overhead pressure from the 20-day moving average guiding it consistently lower since late July. Currently pacing for its third-straight daily loss, LUV is down more than 30% n 2023.

Options bulls are buying the dip, with 6797 calls exchanged so far today, which is double the intraday average volume, compared to 4,259 puts. Most popular is the January 2024 30-strike call.

It's worth pointing out that LUV ranks high on the Schaeffer's Volatility Scorecard (SVS), with a score of 99 out of 100. This suggests the security exceeded option traders' volatility expectations in the past 12 months.

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