Delta Air Lines, Inc. (DAL) Option Bulls Bet on a Comeback

Delta Air Lines, Inc. (DAL) has been trending lower since late January

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Published on Apr 2, 2015 at 11:19 AM
Updated on Apr 20, 2015 at 5:32 PM

Delta Air Lines, Inc. (NYSE:DAL) is off 0.7% today at $42.98. The drop comes after the company reported weak first-quarter unit revenue, citing a strengthening dollar as the cause. Options traders are apparently viewing this as a small bump in the road, as call volume has picked up today. The contracts are changing hands at 1.5 times the normal intraday rate, more than doubling the amount of puts that have come through.

Most popular is the May 49 call. Judging by the data, traders are buying to open this contract, anticipating the shares will surge above $49 before the options expire in mid-May. Delta on the contracts stands at 0.16, meaning there's a 16% chance of the options finishing in the money at expiration. DAL hasn't been north of $49 since January.

During the past two weeks, though, it's been puts that have drawn attention in DAL's options pits. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio has jumped from 0.19 to 0.78 during the past two weeks, with the current reading landing in the 86th percentile of its annual range. This tells us that puts have been bought to open over calls at an unusually high rate.

Delta Air Lines, Inc. (NYSE:DAL) is now off 15.8% since touching an all-time high of $51.06 on Jan. 23. The struggling equity is beginning to draw negative attention as a result. Short interest increased 13% during the past reporting period, and just yesterday the shares were downgraded at Deutsche Bank. With the majority of analysts offering up "strong buy" opinions, more downgrades could be in store.

Daily Chart of DAL since January 2015

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