Boeing Co (BA) Options Traders Go Bargain Hunting

Boeing Co (NYSE:BA) options are running hot as the stock shakes off a negative write-up in Barron's

May 23, 2016 at 12:36 PM
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Boeing Co (NYSE:BA) is trading 0.4% higher at $127.90, following news that the company won an $11.3 billion order for 100 planes from Vietnamese airline VietJet Aviation JSC. But the stock may be missing out on larger gains on account of a pessimistic article published in Barron's (subscription required) over the weekend. The mixed bag of news has BA's options pits buzzing today, with contracts trading at twice the average intraday volume.

The most popular BA option is the June 110 put, where more than 3,300 contracts have traded -- three times more than the next closest strike. However, it's unclear how traders are positioning themselves at this out-of-the-money put. Other BA options traders are targeting BA's weekly 5/27 series, selling-to-open BA's 5/27 128- and 129-strike calls in hopes of the shares holding below these levels through the end of the week, when the series expires. 

Of course, heavy options action isn't new for BA, where open interest is already docked at the peak of its 52-week range. And it's little wonder, as the security's near-term options continue to be a relative bargain. With a Schaeffer's Volatility Index (SVI) of 21% -- in the low 15th percentile of its annual range -- premium on BA's short-term options is pricing in low volatility expectations at the moment.

Stepping back, it looks like options traders have been backing off of their bearish stances of late. Specifically, BA's 10-day call/put volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) now sits higher than nearly two-thirds of the past year's readings, at 0.87.

Likewise, short interest on the stock has been dropping, down 6.5% during the most recent two-week reporting period, to account for less than 4% of BA's total float. Still, these bearish bets represent more than a week's worth of trading, at the equity's average daily volume, leaving plenty of buying power on the sidelines.

On the charts, BA has given up 11.5% so far this year, but has added back 25% since hitting a two-year low of $102.10 in February. However, the shares have been running into trouble at their 200-day moving average in recent weeks, and last week lost a foothold above their 30-day moving average, which had been ushering Boeing Co (NYSE:BA) higher since the first of March.

Daily Chart of Boeing since February

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