Option Trading Journal: Short Put on Delta Earnings
The air lines industries are experencing a significant season recoverying from the pandemic impact. Delta earning is expected to beat the market estmates.
Long theory:
1) The seat occupancy is at new high in multiple months;
2) Gas price has been wavering at lower level.
3) Ticket price keeps going higher, driven by high demand. A round-trip international flight on average costs about $971, up nearly 24 percent from prices at this time in 2019, according to Hopper, the travel app.
The theory works the same for other major players in the industries: $United Airlines (UAL.US)$ $American Airlines (AAL.US)$, except for airlines who can't handle their flight delay.
Therefore Delta is very likely to post an earning that suprises everyone.
In terms of trading, I would recommend sell puts since the implied volatility is at a rather higher level now (+6%). The options prices predicted a ±4.3% post earnings move, compared to a -0.5% actual move. DAL's options post-earnings move has been overestimated 85% of the time in the last 13 quarters.
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