Options Check-Up: Boeing Co, Delta Air Lines, and Southwest Airlines

Analyzing recent option activity on Boeing Co (BA), Delta Air Lines, Inc. (DAL), and Southwest Airlines Co. (LUV)

by Griffin Kruse

Published on Jan 8, 2015 at 8:05 AM
Updated on Jun 24, 2020 at 10:16 AM

Among the stocks attracting attention from options traders lately are aerospace titan Boeing Co (NYSE:BA), as well as airline issues Delta Air Lines, Inc. (NYSE:DAL) and Southwest Airlines Co. (NYSE:LUV). Below, we'll break down how option buyers are positioning themselves, and how much speculators are willing to pay for their bets on BA, DAL, and LUV.

  • Shares of BA has spent the past year marking a series of lower highs, with the equity shedding roughly 8% to settle at $129.51. However, yesterday, Boeing Co reported that it set records for aircraft orders and deliveries in 2014, prompting the stock to add 1.6% over the course of the day. Amid BA's long-term technical struggles, sentiment in the options pits has grown increasingly bearish, with its 50-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio of 0.66 sitting just 5 percentage points away from an annual pessimistic peak. Short-term options for BA are relatively inexpensive at the moment, with its Schaeffer's Volatility Index (SVI) of 18% ranking in the 39th percentile of all similar readings taken in the past year.

  • On the opposite end of the spectrum, shares of DAL have soared, adding 57.6% year-over-year to perch at $46.97. The airline has also benefited from crude oil's massive slump (which translates into lower fuel costs for the company and its sector peers), and outperformed the S&P 500 Index (SPX) by nearly 37 percentage points over the past three months. Despite all this positive price action -- and DAL's all-time high north of $50, notched just last week -- overall sentiment in the equity's options pits is bearish. Delta Airlines, Inc.'s 10-day ISE/CBOE/PHLX put/call volume ratio of 0.96 is just 4 percentage points away from an annual high. Of course, some of the recent put buying could be attributable to shareholders looking for an options hedge. Whatever the motive, DAL's short-term options for the stock are historically inexpensive, as its SVI of 38% sits lower than two-thirds of all similar readings taken in the past year.

  • LUV has also skyrocketed, gaining 102.2% year-over-year to hit $40.80. The budget airline also hit a fresh all-time high of $43.19 on New Year's Eve, and has beaten the SPX by 26 percentage points over the past three months. However, sentiment in Southwest Airlines Co.'s options pits is currently bearish. The stock's 10-day ISE/CBOE/PHLX put/call volume ratio of 0.75 ranks in the 98th percentile of all similar readings taken in the past year, showing an elevated preference for puts over calls in the past two weeks. Again, though, in light of the equity's uptrend, some of the recent put purchases could be due to hedging activity. If LUV continues its path upwards, an exodus of "vanilla" bears could send the shares even higher. Recent option buyers could be striking at a good time, as the security's Schaeffer's Volatility Scorecard (SVS) of 91 indicates the shares have tended to make oversized moves over the past year, relative to what the options market has priced in.

A Schaeffer's 39th Anniversary Exclusive!

8 Top Stock Picks for 2020

Access your FREE insider report before it's too late!


  
 
 

Partnercenter