Regional airline JetBlue (JBLU) has traded flat over the past year, far underperforming the overall stock market. One trader sees shares trending higher in the coming weeks.
That’s based on the April 12 $7.50 calls. With 25 days until expiration, 12,135 contracts traded compared to a prior open interest of 168, for a 72-fold rise in volume on the trade. The buyer of the calls paid $0.23 to make the bullish bet.
JetBlue shares recently traded for about $7.20, so the stock would need to rise about $0.30, or about 4 percent for the option to move in-the-money.
Shares have been trending high since January when merger efforts ended, but the stock has pulled back from its 52-week high of $9.45.
Operationally, the airliner has been lackluster, with a 4 percent drop in revenues over the past year. And the company lost money overall. Now, JetBlue trades at an estimated 56 times forward earnings.
Action to take: Shares are trending higher, but long-term investors may want to look elsewhere in the airline industry. Many of the bigger players are getting profitable again, and a few even pay dividends.
For traders, the April 12 $7.50 calls make sense as a very short-term trade in the coming days. Traders should look to take profits, and given the low cost of the option, can likely see mid-double-digit returns.
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 company mentioned in this article.