Options Bears Board Delta Stock After Weak 2019 Guidance

DAL has shed nearly 12% in December already

Managing Editor
Dec 13, 2018 at 2:14 PM
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The shares of Delta Air Lines, Inc. (NYSE:DAL) are down 4.7% to trade at $53.55, after the airliner issued a weaker-than-expected revenue outlook for 2019. At the company's investor day, Delta predicted a 4% to 6% rise in revenue -- weaker than analysts' expectations -- citing concerns about global economic growth. In response to the pullback today, options bears are coming out in droves. 

At last check, over 18,000 put options have changed hands so far today, three times what's typically seen at this point and nearly triple the average daily volume. The December 47 put is seeing notable attention, with bears likely buying to open the puts to bet on a steeper short-term slide for DAL. Meanwhile, roughly 31,000 calls have crossed the tape -- also three times the norm -- the majority of which is attributable to big blocks of more than 10,000 January 2019 57.50- and 60-strike calls exchanged, possibly as part of a spread.

On the charts, Delta stock nabbed a record high of $61.31 back on Nov. 30, but has pulled back since then, shedding 11.8% in December thus far. Today's drop takes DAL back below its year-to-date breakeven level of $56, and has the shares testing their 320-day moving average for the first time since late October.

Daily Stock Chart DAL

Despite the uptick in puts today, calls have been the options of choice in recent days. Data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows 12,395 calls were bought to open in the last 10 days, compared to just 5,656 puts.

However, Delta stock's Schaeffer's put/call open interest ratio (SOIR) of 0.83 sits in the 80th percentile of its annual range. This indicates that while call open interest still outnumbers put open interest on an absolute basis, looking at options expiring in the next three months, short-term traders are more put-heavy than usual right now.

Elsewhere, analysts remain steadfast in their support for the airline name. All 13 of the brokerages covering DAL rate it a "buy" or better, and its average 12-month price target sits all the way up at $69.79, a 30% premium from its current perch.

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