Delta Air Lines Options Sees Highest Put-Call Ratio Since May After Earnings Miss

Luzi Ann Santos wrote a column · Oct 10, 2024 23:36

$Delta Air Lines (DAL.US)$ options are on course for the highest put-call ratio since May after earnings released Thursday morning missed analysts' estimates for a second straight quarter.

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The company reported that adjusted earnings fell to $1.50 a share in the three months that ended Sept. 30, from $2.03 a year earlier. Analysts, on average expected adjusted EPS of $1.517, according to estimates compiled by Bloomberg. Revenue also trailed expectations for a second straight quarter, missing estimates by 0.4%.

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"We anticipate a 1-point impact to total unit revenue from reduced travel demand around the election," Delta President Glen Hauenstein said in the company's earnings release Thursday morning. "With this, total revenue growth is expected to be up 2 percent to 4 percent compared to prior year on capacity growth of 3% to 4%."

Still, he said the industry supply growth continues to improve, helping brighten Delta's prospects heading into 2025.

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The comments spurred increased volatility, boosting the volume of put options. As of 11:01 a.m. in New York, 43,130 put options were traded across 17 expiration dates stretching through Jan. 15, 2027. That's 2.7 times the call options, the highest ratio since May.

The heaviest volume was in put options that give the holders the right sell Delta shares at $50 each, after the stock price decline pushed the contracts closer to being in-the-money. More than 3,400 of those puts expiring tomorrow changed hands as of 11:12 a.m. in New York, exceeding the open interest of 2,560, exchange data tracked by moomoo showed. The price of that contract swung from as high as $1.10 to 26 cents.

Delta's quarterly results showed "lowered yields" in all regions, according to Bloomberg Intelligence analysts. They viewed that as "a continued sign that supply exceeds demand for most markets." They also cited challenges in recent wage increases, while citing the tailwind seen by the air carrier from lower fuel costs.

Shares have rallied 27% this year, outpacing the 21% advance for the $S&P 500 Index (.SPX.US)$. While eight of the 15 technical indicators tracked by moomoo are signaling that the stock may be overbought and the trend could turn bearish, analysts remain optimistic about Delta's prospects.

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Morgan Stanley analysts, who have an overweight rating on the stock and a price target of $85 said they would be "buyers on weakness," believing that the earnings miss and the softness in the fourth quarter outlook, according to a Bloomberg report.

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