Boeing Co (BA) Presents an Options-Buying Bargain After Iran Deal

Boeing Co (BA) is climbing the charts after the company was awarded permission to sell jets to Iran

Kirra Fedyszyn
Sep 22, 2016 at 1:18 PM
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While the broader market continues to rally following Wednesday's Fed decision to leave interest rates unchanged, Dow component Boeing Co (NYSE:BA) is climbing the charts after inking a fresh deal. BA options traders, meanwhile, are busy picking up calls, and some may be finding bargains on the aerospace stock's near-term options.

BA has added 1% to $131.85 today on news the company has, along with Airbus, been granted permission to sell jetliners to Iran as part of a deal potentially worth up to $50 billion. Also boosting BA is news the U.S. won a World Trade Organization (WTO) ruling against the European Union regarding financial subsidies to Airbus.

On the charts, BA has been in a choppy sideways pattern since rallying back from its February lows, and still sits on a nearly 9% year-to-date loss. In fact, the shares have spent the last six months repeatedly running into trouble in the $135-$137 region, which also served as resistance in late 2014, and coincides with the stock's overhead 80-week moving average -- a trendline BA hasn't topped on a weekly closing basis since Jan.1.

Despite this lackluster technical performance, traders and analysts are largely in BA's bullish corner. More than half of the brokerage firms tracking the stock rate it a "buy" or better. Plus, the average 12-month price target of $148.53 sits at a healthy premium over current levels. Meanwhile, short interest has declined in recent reporting periods, and now accounts for less than 5% of BA's total float.

In the options pits, speculators have been targeting calls at a heavier-than-usual rate. Specifically, BA's 10-day call/put volume ratio across the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) sits higher than 79% of the past year's readings, at 1.28. And echoing this call-skewed backdrop is the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.99 -- just 3 percentage points from a 12-month low.

It's also an attractive time to pick up premium on BA's near-term options. The stock has a Schaeffer's Volatility Index (SVI) of 18% -- in the low 7th percentile of its annual range. And its 30-day at-the-money implied volatility of 17.6% ranks lower than 90% of all readings in the last year. That means short-term options should be pricing in unusually low volatility expectations.

Today, BA calls are changing hands at 1.7 times the typical intraday rate, with roughly 9,100 contracts on the tape -- nearly double the number of puts. Upcoming weekly series are particularly popular, with the weekly 9/23 132- and 133-strike calls receiving heavy attention, followed by the weekly 10/28 131- and 135-strike calls. If these calls are being bought to open, the buyers are betting on Boeing Co (NYSE:BA) to continue its rally above the strike prices by the respective expiration dates.

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