Boeing Co (BA) Options Traders Bet On More Trump Turbulence

A critical tweet from the President-elect Donald Trump has Boeing Co (NYSE:BA) stock trading lower -- and options traders are bracing for more losses

Dec 6, 2016 at 12:23 PM
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Aerospace company Boeing Co (NYSE:BA) is under fire, after a tweet from President-elect Donald Trump accused BA's $4 billion price tag for the Air Force One program as being "out of control." Boeing stock dropped as low as $150.02 earlier, but was last seen trading down 0.8% at $150.96. Meanwhile, in the option pits, puts on the Dow stock are trading at almost twice their usual intraday rate -- and outpacing calls nearly 2-to-1 -- with 7,502 puts on the tape, compared to 4,147 calls. 

Drilling down, there is possibly some buy-to-open action occurring at the January 2017 140-strike put, as well as the weekly 12/9 150-strike put -- the two most active BA options so far today. If this is the case, the option buyers are betting on the stock to extend its slide south of the strike prices by the respective expiration dates of Friday, Jan. 20, and this Friday's close.

Widening the scope, today's penchant for puts runs counter to the withstanding trend seen in BA's option pits. Although BA's top front-month open interest position is the December 140 put -- with 5,585 contracts outstanding -- the stock's 50-day call/put volume ratio of 1.02 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the 69th percentile of its annual range. This indicates that call options have been bought to open at a slightly accelerated pace compared to put options over the last 50 days of trading.

Regardless of whether options traders are targeting calls or puts, now appears to be an opportune time for BA premium buyers to strike. The stock's Schaeffer's Volatility Index (SVI) of 19% sits lower than 91% of all other readings from the past 12 months, indicating the security's near-term options are pricing in relatively muted volatility expectations at the moment. Echoing this, BA's 30-day at-the-money implied volatility of 18.8% ranks in the low 20th percentile of its annual range.

Looking at the charts, BA has been on a steady climb higher since breaking north of $135 in late October, and notched a new annual high of $153.75 yesterday. However, the stock is now staring up at potential resistance in the $150-$160 area, which halted rally attempts in 2015. In addition, $153.15 marks a 50% rally from BA's February lows, which could add another layer of resistance for shares of BA. Meanwhile, Boeing Co's (NYSE:BA) 14-day Relative Strength Index (RSI) settled Monday night at 69 -- right on the cusp of overbought territory -- suggesting today's drop could have been in the cards.

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