Is the Options Market Signaling Another Down Move in Airlines?

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  • The U.S. Global JETS ETF (NYSEARCA: JETS) is a fund that provides investors access to the global airline industry through airline operators and manufacturers. It’s top three holdings are United Airlines Holdings Inc (NASDAQ: UAL), American Airlines Group Inc (NASDAQ: AAL) and Delta Air Lines, Inc (NYSE: DAL). Other non-airline holdings are Textron Inc (NYSE: TXT) and General Dynamics Corporation (NYSE: GD).

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  • When news from Norwegian Cruise Line Holdings Ltd (NYSE: NCLH) came regarding extending the suspension of voyages to September, it was pretty clear that the travel industry will be slow to reopen. The on Tuesday, Southwest Airlines Co (NYSE: LUV) announced that it will extending its limited seating for its flights until at least September, it helped drive it home even further. The reality is that it may even extend much further than September if regulators maintain they grip on trying to limit the spread of VCOVID-19.

    On Wednesday, there were several unusually large option trades on JETS. This was the second day in a row that a significant number of put options were bought on the 18 SEP 20 $15 strike price. A 5,000-contract order had 3,000 contracts filled at the ask and 2,000 filled between the market for a $1.40 to $1.45.

    Here are links to our last two unusual option activity reports.

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    Action to Take: JETS is a bearish opportunity with a close below $17.50 on above average volume and a $15 target. With the stock likely being hard to borrow, speculators may want to consider buying the 18 SEP 20 $15 put for around $1.45. Consider rolling to a lower strike if the stock moves down by $1.50.