Airline operator
American Airlines Group (AAL) is up 18% over the past year, underperforming the overall stock market. One trader sees shares trending higher into the end of the year.
That’s based on the December 27, 2024 $15 calls. With 30 days until expiration, 35,612 contracts traded compared to a prior open interest of 288, for a 124-fold rise in volume on the trade. The buyer of the calls paid $0.47 to make the bullish bet.
American Airlines shares recently traded for just under $14.50, meaning shares would need to rise by about $0.50, or just over 3.5%, for the option to move in-the-money. The strike price of the option is just under AAL’s 52-week high of $16.15.
Operationally, American Airlines has had a flat year. Revenues grew by just 1.2%, and earnings growth was slightly negative.
However, shares still trade at less than 0.2 times their price-to-sales, and shares look inexpensive at just 6 times forward earnings.
Action to take: On a valuation basis, shares look inexpensive at current prices. And they’re trending higher, making AAL attractive for both value and momentum investors over the months ahead.
For traders, a continued uptrend past the holiday season looks likely. That makes the December 27 $15 calls an attractive play given their low cost and high chance of moving in-the-money.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.
