Shares of American Airlines Group (AAL) have been trading in a range over the past few months. One trader sees shares heading higher in the coming weeks.
That’s based on the December 23 $17.50 calls. With 39 days until expiration, 11,589 contracts traded compared to a prior open interest of 100, for a 116-fold rise in volume on the trade. The buyer of the calls paid $0.22 to make the bullish bet.
The stock recently traded for about $15, so shares would need to rally $2.50, or about 17 percent, for the options to move in-the-money. That’s a steep move, but shares have been known to make such big jumps before.
The airline’s shares have shed 34 percent in the past year amid a slowing economy and high fuel costs. Revenue still continues to rebound from the pandemic, with a 50 percent jump in the past year, even as the company has just missed earning a profit.
Action to take: Energy prices may play a wild card, but shares are near the lower end of a trading range, and could head higher in the coming weeks. Shares don’t pay a dividend at present, so buyers may want to look elsewhere for income.
For traders, the calls are well positioned for gains in the next month. And they’re priced low enough for potential triple-digit returns. However, if the market sells off, the options are easily on track to expire worthless. So look for a quick win and move on to the next trade.
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 of the companies mentioned in this article.