A second consecutive down day for shares in airline stocks spurred heavy trading traffic in options across the largest market-cap names, including United Continental Holdings, Inc. (Ticker: UAL), Delta Air Lines, Inc. (Ticker: DAL), American Airlines Inc. (Ticker: AAL), and JetBlue Airways Corporation (Ticker: JBLU). Shares in these air carriers are down roughly 6.0%, 5.0%, 5.5% and 4.0%, respectively, as of the time of this writing amid higher oil prices and in the wake of Lufthansa’s cut to its 2014 profit guidance on Wednesday.
Options on American Airlines and Delta Air Lines are seeing the most volume overall with more than 55,000 contracts traded on each, while JetBlue is experiencing the highest volume relative to its average daily options volume. Volume in JBLU options is nearing 40,000 contracts just before midday in New York, which is approximately four times its average daily reading of around 9,200 contracts.
Meanwhile, smaller air carrier, Hawaiian Holdings, Inc. (Ticker: HA), Hawaii’s biggest and longest-serving airline, with a market cap of around $816 million (vs. roughly $33 billion market-cap for Delta Air Lines and $29 billion for American Airlines), also attracted heavier than usual options activity. Upwards of 4,100 contracts have changed hands on Hawaiian Holdings as of 11:30 am ET, which compares to average daily volume for the stock of around 640 contracts. Shares in HA are down 3.5% on the session at $14.65 as of the time of this writing. Hawaiian shares on Monday of this week traded up to a record high of $16.49.
As the chart below shows, shares in the air carriers mentioned have lost some altitude lately, but the stocks are still up, in some cases significantly, for the most recent six month period.
Chart – Six-month chart of AAL, DAL, UAL, JBLU & HA
UAL – United Continental Holdings Inc. – Airline stocks are bucking the trend on Thursday, flying high amid a down day for U.S. equities. Shares in United Continental Holdings increased as much as 12.6% during the first half of the session to a record high of $46.19 following the release of the company’s December operational results and after several analysts raised their fourth-quarter earnings estimates on the carrier.
Trading in UAL call options expiring this month and next suggests some traders may be positioning for the price of the underlying to continue to climb in the near term. The 17 Jan ’14 $46 and $47 strike calls traded more than 900 times by midday in New York, trumping open interest levels in each case. Time and sales data suggests most of the calls were purchased, with the average asking premium paid for the $46 strike calls near $0.83 each and $0.39 per contract on the $47 strike calls as of the time of this writing. The 21 Feb ’14 $46 strike call options also attracted fresh interest, with around 1,400 lots traded against open interest of 100 contracts. It looks like most of the volume was purchased at an average premium of $2.27 each. Traders snapping up the February expiry $46 calls may be looking for the stock to rally leading up to and perhaps following the company’s fourth-quarter earnings report, which is likely to be released in two weeks time. Buyers of the Feb $46 calls stand ready to profit at expiration next month in the event that UAL shares rally 7.6% over the current price of $44.85 to exceed the average breakeven point on the upside at $48.27.
Wasn't it just 2 days ago that the EU was all set to pop the ESM to $1.25Tn and the IMF was going to add another Trillion and the Fed was talking about more QE in the $1.25Tn range, which plunged the Dollar to multi-week lows? Shouldn't adding 6% of the entire planet's GDP in additional stimulus give us more than a one-day pop in the markets?
As I pointed out in Monday's Morning Alert to Members – these are all just RUMORS and my conclusion in the Alert was:
Despite the bullish turn of events (which we anticipated last week) we're more inclined to cash out our bullish trades into the excitement and press our bear bets and TOMORROW, if we're still over our levels – THEN we will scramble to add some aggressive bullish trades to our virtual portfolios. Again, I cannot stress enough that CASH is my preferred position because this market is tough to call and you need to be very flexible and very nimble to trade it.
We proceeded as planned and, so far, we haven't had any reason to capitulate and get more bullish and that is both surprising and disappointing as this is the end of the first quarter of 2012 – if not now – when? As David Fry notes:
Monday’s rally was typical as we head toward the end of the quarter. Hedge fund performance fees are on the line and any way to boost these profits is job one. Top holdings for hedge funds include the usual suspects: AAPL, IBM, INTC, BAC, DIS, HD etc.
With little volume it’s easy for algos and hedge funds to prop stocks on little hard news. Tuesday we briefly saw more of this. Just as markets were weakening a story appeared using the Fed’s favorite oracle, the WSJ, as Fed governor Rosengren stated, “more stimulus is on the table”. Immediately HFT algos jumped and markets rose if only briefly.
It's very exciting for us as PLCN (see Thursday's notes) went all the way up to $736 on Monday and sold off on some pretty heavy trading yesterday. Slowly but surely, our negative premise is beginning to take shape as Piper Jaffray is finally catching up with us and noting "a sharp decline in unique visitors to Priceline's booking.com" from growth of 61 percent during the…
UAL - United Continental Holdings, Inc. – A three-legged options combination play on United Continental suggests one strategist expects the price of the underlying to rebound by June expiration. Shares in UAL are down 2.25% at $20.75 as of 12:05pm in New York trade. The contrarian player is positioning for the medium-term rally by lowering the cost of buying a debit call spread with the sale of out-of-the-money put options. The trader sold 10,000 puts at the June $19 strike, to buy the 10,000-lot June $22/$26 call spread, for which he received a net credit of $0.10 per contract. The investor at least keeps the net credit as long as shares in UAL exceed $19.00 through expiration day. Additional profits are available to the bullish trader in the event that United Continental’s shares reverse course to rally 6.0% over the current price of $20.75 to trade above $22.00 in the next couple of months to expiration. Including the net credit, the investor may pocket maximum potential profits of $4.10 per contract on the transaction if the price of the underlying stock jumps 25.3% to exceed $26.00 at expiration in June.
HBC - HSBC Holdings PLC – It looks like one options investor raised bullish expectations on Europe’s biggest bank this morning with shares in HSBC Holdings currently trading 1.0% higher on the session at $54.44 as of 11:25am. The financial services provider’s shares were higher in European trading as well on sentiment that upcoming results from a government-sponsored Independent Commission on Banking will be less thorny than some investors initially anticipated. The trader responsible for the majority of options volume generated on HBC thus far today appears to be rolling a previously established bullish stance up to the next available strike price in the…
UAL - United Continental Holdings, Inc. – The airline operator’s shares rose 4.3% this morning to an intraday high of $23.76, rebounding 9.7% off of its lowest point of the week at $21.65, but still trading substantially lower than last week’s closing price of $27.02. Shares relinquished some of the earlier gains this afternoon to stand 1.65% higher on the session at $23.16 as of 12:15pm in New York. At least one options strategist is positioning for UAL’s shares to continue recovering in the next couple of months. It looks like the investor employed April contract ratio call spreads to prepare for a sizable, albeit limited, correction higher by expiration day. The trader appears to have purchased approximately 3,000 in-the-money calls at the April $22 strike for an average premium of $2.49 apiece, and sold roughly 6,000 calls up at the April $27 strike for an average premium of $0.52 each. The net cost of the transaction amounts to an average of $1.45 per contract, and positions the trader to profit in the event that UAL’s shares rally 1.25% over the current price of $23.16 to surpass the average breakeven point on the upside at $23.45 by April expiration. Maximum potential profits of $3.55 per contract are available to the trader should shares in United Continental Holdings jump 16.6% to settle at $27.00 at expiration in a couple of months. The sale of twice as many higher-strike call options expose the investor to losses should the stock fly higher than he expects within the time remaining to expiration. Profits give way to losses on this strategy if shares in UAL jump 31.9% to exceed the upper breakeven price of $30.55 by April expiration day. The call options transacted in the ratio spreads represent opening positions given the minimal levels of open interest observed at either strike price.…
Today’s tickers: UAL, KSS, ANN, KO, SINA, XLF, FRX & OI
UAL - United Continental Holdings, Inc. – The world’s largest carrier jumped up on our ‘most active by options volume’ market scanner earlier today after one bullish options player purchased a large call spread in the December contract. Shares in United Continental rose 0.90% this afternoon to trade at $27.42 as of 3:00 pm. The investor purchased approximately 11,200 calls at the December $29 strike for a premium of $0.72 each, and sold the same number of calls at the higher December $31 strike at a premium of $0.32 each. Paying a net $0.40 per contract for the spread, the investor is prepared to profit should shares in UAL surge 7.2% over the current price of $27.42 to surpass the effective breakeven point to the upside at $29.40 by expiration day. The trader is poised to accumulate maximum potential profits of $1.60 per contract, roughly $1.792 million, if the airline operator’s shares jump 13.05% and trade above $31.00 by expiration in December.
KSS - Kohl’s Corp. – Massive prints in Kohl’s Corp. call and put options caught our eye this afternoon. Shares of the department store operator that sells nationally recognized as well as privately branded goods increased as much as 4.165% in the second half of the session to touch an intraday high of $52.76. It looks like the investor responsible for the mammoth transaction sold 50,000 puts at the December $50 strike for a premium of $0.85 each, and purchased the same number of calls up at the December $57.5 strike at a premium of $0.30 apiece. The risk reversal was tied to the sale of 2.15 million shares of the underlying stock at a price of $52.12 on a 0.43 delta. The investor receives a net credit…
On July 20th, a Republican U.S. Senator lost his main financial backers for having urged Republicans to vote for Donald Trump instead of for Hillary Clinton.
The Koch brothers speak with their words, which can’t be trusted, but they also speak with their money, their investments, which are always honest expressions of their actual beliefs and desires. This time, the Kochs spoke with their money, just a da...
The price of gas is on the rise again—up five percent globally in the last three months. But cost per gallon alone doesn’t give a complete picture of how big a bite gasoline takes out of an average driver’s paycheck. We ranked 61 countries by three economic measures to see who has the most affordable gas, and who feels the most pain at the pump.
The global rally in equities Moderated last week. The average gain of the eight indexes on our world watch list was a respectable 0.41%, down from the previous week's steroidal 3.87% average. Hong Kong's Hang Seng was the top performer with a 1.41% advance. At the other end, the chronic laggard Shanghai Composite fell 1.36%.
A Closer Look at the Last Four Weeks
The tables below provide a concise overview of performance comparisons over the past four weeks for these eight major indexes. We've also included the average for each week so that we can evaluate the performance of a specific index relative to the overall mean and better understand weekly volatility. The colors for each index name help us visualize the compara...
By Jacob Wolinsky. Originally published at ValueWalk.
Relypsa Inc (NDAQ:RLYP) — to be acquired by Galenica AG (VTX:GALN) for $32 per share in cash is soaring this morning up about 58 percent at the time of this writing in early morning. On the other hand shares of Galenica are down on the announcement by about 8 percent. What are the details of the deal? Here is what the sell side analysts are saying about the pharma news.
Relypsa Inc (NDAQ:RLYP) bid – analysts react
Relypsa will be acquired by Galenica for $32 per share, a 59% premium over the last closing price. We have thought that Relypsa would likely be acquired at some point, given the opportunity to grow Veltassa to be a significant commercial brand, ...
Companies around the world are exploring blockchain, the technology underpinning digital currency bitcoin. In this Blockchain unleashed series, we investigate the many possible use cases for the blockchain, from the novel to the transformative.
Most people agree we do not need to know how a television works to enjoy using one. This is true of many existing and emerging technologies. Most of us happily drive cars, use mobile phones and send emails without knowing how they work. With this in mind, here is a tech-free user guide to the blockchain - the technology infrastructure behind bitcoin...
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After a three-year bull run that more than quadrupled its value by its peak last July, IBD’s Medical-Biomed/Biotech Industry Group plunged 50% by early February, hurt by backlashes against high drug prices and mergers that seek to lower corporate taxes.
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Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts. After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.) Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.
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