Options Bulls Stick With Boeing Ahead of Earnings

BA has struggled lately amid its well-documented aircraft issues

by Patrick Martin

Published on Apr 22, 2019 at 2:35 PM

Blue chip Boeing Co (NYSE:BA) just can't stay out of the news, this time in hot water after a New York Times article over the weekend pointed to "shoddy production" at a factory that makes the 787 Dreamliner. What's more, the Dow name is also set to release its quarterly report before the open Wednesday, April 24. Ahead of the event, BA call options have been flying off the shelves, perhaps signaling that options traders think the worst is over for the battered shares.

In fact, the equity showed up on Schaeffer's Senior Quantitative Analyst Rocky White's list of stocks that have attracted the highest weekly options volume during the past 10 days, with names highlighted in yellow new to the list. Per the chart below, 227,807 weekly BA calls were exchanged over this two-week time frame, as opposed to 183,312 weekly puts.

MAO April 22

Digging deeper, there's been an increase in this bullish activity in the options pits, as data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows BA's 10-day call/put volume ratio ranking in the elevated 72nd annual percentile. In other words, option buyers have picked up Boeing calls over puts at a slightly faster-than-usual pace during the past two weeks.

What's more, its Schaeffer's put/call open interest ratio (SOIR) of 0.80 reveals that near-term call open interest outnumbers put open interest, and this reading's annual percentile rank of 8% indicates such a call-skew has been quite rare in the past year. In fact, the top four most populated strikes are calls that expire in May or June, led by the nearly 8,800 contracts in residence at the June 400 call.

The Dow name has a solid, if unspectacular, earnings history, with the stock closing higher the day after five of the last eight reports, including a 6.3% jump in late January. Over the past two years, BA shares have swung an average of 3.9% the day after earnings, regardless of direction. This time around, the options market is pricing in a higher-than-usual 5.9% swing for Thursday's trading. 

However, the security's Schaeffer's Volatility Scorecard (SVS) stands at 85 out of a possible 100. This means BA has tended to make outsized moves over the last year, compared to what the options market had priced in -- a potential boon to premium buyers.

At last check, Boeing stock was down 0.8% to trade at $376.55. Since the fateful 737 crash in mid-March, which resulted in a steep bear gap for BA, the shares have encountered resistance at their 30-day trendline. In addition, the round-number $400 level has acted as a ceiling for the blue chip, and the abundance of overhead calls at this strike could translate into an added layer of options-related resistance for the equity. 

MAO BA


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