American Airlines Put Options Volume Climb as Investors Seek Hedge Against Price Slump
$American Airlines (AAL.US)$ investors and speculators are rushing to put options that could protect holders against further price slump for a stock that's already tumbled to the lowest since the global pandemic wreaked havoc across the industry.
Options that give the holders the right to sell American Airlines shares at $8 each are attracting the heaviest trading in puts across 20 expiration dates, data tracked by moomoo as of July 11 showed. About three-quarters of the 41,050 contracts traded as of 12:50 p.m. in New York are in those expiring in 71 days.
Investors are seeking a hedge against further losses as American Airlines shares sank, tracking declines across the industry. The market soured on airlines after Delta Air Lines reported late Wednesday a bigger decline in second quarter earnings than analysts estimated. The company also gave a weaker-than-expected revenue growth forecast for the quarter ending in September.
Competition among carriers is pushing them to slash fares at a time when the companies are grappling with fuel and labor costs. In the case of Delta, adjusted earnings per share fell to $2.36 in the second quarter, from $2.68 a year earlier, as higher costs muted the positive impact from record revenue.
The price of the $8 put options expiring on Sept. 20 climbed by 50% as volume surpassed open interest. Volume climbed to 30,049 contracts Thursday from almost nothing yesterday.
For contracts expiring tomorrow, trading is heaviest trading is in calls that give the holders the right to buy American Airlines shares at $11, amid the selloff that saw the share price tank below that strike price.
The slump in American Airlines shares accelerated in late May after the company lowered its adjusted earnings guidance to a range of $1 to $1.15 for the second quarter, from its previous outlook of $1.15 to $1.45 a share as fuel costs rise, according to its filing with the Securities and Exchange Commission. Actual quarterly results are expected in two weeks.
Share your thoughts on American Airlines. Do you see the shares rebounding from the slump?
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Options trading entails significant risk and is not appropriate for all customers. It is important that investors readCharacteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options. Because of the importance of tax considerations to all options transactions, the customer considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy. All company analysis information is provided by third parties and not by Moomoo Financial Inc. Any illustrations, scenarios, or specific securities referenced herein are strictly for informational purposes and is not a recommendation. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct.
Options trading entails significant risk and is not appropriate for all customers. It is important that investors readCharacteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount. Supporting documentation for any claims, if applicable, will be furnished upon request. Moomoo does not guarantee favorable investment outcomes. The past performance of a security or financial product does not guarantee future results or returns. Customers should consider their investment objectives and risks carefully before investing in options. Because of the importance of tax considerations to all options transactions, the customer considering options should consult their tax advisor as to how taxes affect the outcome of each options strategy. All company analysis information is provided by third parties and not by Moomoo Financial Inc. Any illustrations, scenarios, or specific securities referenced herein are strictly for informational purposes and is not a recommendation. Past investment performance does not guarantee future results. Investing involves risk and the potential to lose principal. This content is also not a research report and is not intended to serve as the basis for any investment decision. The information contained in this article does not purport to be a complete description of the securities, markets, or developments referred to in this material. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Furthermore, there is no guarantee that any statements, estimates, price targets, opinions or forecasts provided herein will prove to be correct.
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Former editor at Bloomberg, ex-commentary editor at Lazard. Posts aren’t investment advice. Views are just mine.
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Lone Mower : Time for AAL to fly again