Unusual Options Activity: JetBlue (JBLU)

Airline carrier JetBlue (JBLU) is down nearly 50 percent over the past year, as the carrier has been working on the acquisition of Spirit Airlines (SAVE). One trader sees shares trending higher into the start of next year.

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  • That’s based on the January 2024 $4.00 calls. With 78 days until expiration, 42,989 contracts traded compared to a prior open interest of 526, for an 82-fold rise in volume on the trade. The buyer of the calls paid $0.49 to make the bullish bet.

    Shares recently traded for about $3.75, so they would need to rise about 25 cents, or about 7 percent, for the option to move in-the-money.

    JetBlue has a 52-week low of $3.42, and is trading at a price last seen in 2011.

    At current prices, shares trade at less than 7 times earnings, and for less than half of their book value. That’s a bargain. However, the Spirit acquisition is a large one, which is why shares have taken a hit.

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  • Chances are it will take time for the stock to recover, but shares could still trend higher with the overall market in the coming weeks.

    Action to take: Contrarian investors may like shares here for a rebound. There could be a quick double-digit move higher in shares in the coming weeks, but going back to old highs will take a long time after the merger is complete.

    For traders, the January $4 calls are an inexpensive way to bet on a potential rally higher. The options could see mid-to-high double-digit gains on a strong rally.


    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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