Unusual Options Activity: Delta Air Lines (DAL)

Airliner Delta Air Lines (DAL) is up over 40 percent in the past year, as flight demand has remained strong and energy prices have declined. One trader sees shares giving back some of those gains in the coming weeks.

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  • That’s based on the August $45 puts. With 50 days until expiration, 4,324 contracts traded compared to a prior open interest of 173, for a 25-fold rise in volume on the trade. The buyer of the puts paid $1.47 to make the bearish bet.

    Shares recently went for about $46, making this an at-the-money trade. Delta shares just spiked higher to a new 52-week high on Tuesday, and are starting to look overbought.

    Delta has performed well as a business over the past year, with revenues up nearly 37 percent. Plus, shares trade at a reasonable 14 times earnings. But the stock may still have risen too far, too fast.

    Action to take: Investors interested in airliner stocks may want to wait for the next drop lower, given the strong rally in recent sessions. Delta just reinstated a dividend, for a yield of about 1 percent.

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  • For traders, the August puts would play out well for a slump in shares in just under two months. The option is near-the-money, and could see mid-double-digit gains on a drop in the coming months. And the trade plays well to a possible summer drop in stocks.

     

    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.