Unusual Options Activity: JetBlue Airways (JBLU)

Regional air carrier JetBlue Airways (JBLU) has lost 25 percent of its value over the past year, as the company has been working on a massive acquisition. One trader sees shares floundering in the weeks ahead.

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  • That’s based on the December 29 $5.50 puts. With 15 days until expiration, 15,271 contracts traded compared to a prior open interest of 141, for a 108-fold rise in volume on the trade. The buyer of the puts paid $0.30 to make the bearish bet.

    JetBlue recently traded right at $5.50, making this an at-the-money trade. The stock is well off its 52-week low of $3.42, set in late October.

    Besides the overhang from its merger, JetBlue has seen revenues drop 8 percent this year, even as air travel trends have improved and energy prices have come off their highs.

    At present, JetBlue isn’t earning a profit, but shares are valued at half their book value.

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  • Action to take: A big merger can weigh on shares for some time, which could lead to the stock trending lower in the coming weeks. And shares look overbought following their massive rally from their lows set just a few weeks ago.

    For traders, the December puts could work well as a year-end market hedge.

    Shares look overextended and ready to pull back a bit. The options can likely deliver mid-to-high double-digit gains. Traders should look to take quick profits, as there’s little time left on the 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.

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