Unusual Options Activity: Delta Air Lines (DAL)

Shares of Delta Air Lines (DAL) have been trending down since April, and have seen some big drops on some days depending on Covid variant fears. One trader sees the trend reversing in the coming weeks.

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  • That’s based on the November $43 calls. With 108 days until expiration, over 10,025 contracts traded against a prior open interest of 324 for a 39-fold rise in volume. The buyer of the call options paid about $2.17 to make the trade.

    Shares of the airline have traded as high as $52 in the past year, and at a current price of about $40, shares would need to rise about 7.5 percent for the option to move in-the-money before expiration.

    That’s certainly possible, as the airline recently reported that it significantly narrowed its losses in the most recent quarter. Coming off pandemic losses, revenue is up nearly 390 percent over the past year, and airline travel trends are nearly back to their pre-covid levels.

    Action to take: Shares are looking a bit oversold here, but could still have a few bad down days depending on covid-related news.  Investors may like shares, although the airlines are likely a long ways off from paying dividends again.

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  • The November calls look like an attractive way to play a short-term bounce higher, particularly if the recent drop is attributable to Covid variant fears. Given the price of the option, traders should look to nab high-double digit profits, potentially a double, but also look to exit the trade before expiration, as it’s right around the company’s next earnings report.

     

    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.