Delta Air Lines Sees Bearish Move
CHICAGO (
) -- At least one investor has apparently rolled out a bearish front-month position out one month in
Delta Air Lines
(DAL) - Get Report
.
DAL did not announce any news this morning and the shares are trading up four cents to $13.02. The airline sector has remained mixed throughout the last week, and ONN.tv covered an interesting
on March 4 when the stock was trading at $12.69.
At about 11:30 a.m. EST, more than 7,500 March 13 calls changed hands versus open interest of nearly 22,000 contracts while the same number of April 13 calls crossed the tape versus current open interest of 1,600 contracts.
These open interest and volume discrepancies suggest investors closed the front-month options and opened the April 13-strike calls. A look at time and sales shows the March 13 calls traded for 15 cents per contract, and the April 13 calls hit the tape for 65 cents per contract.
Investors most likely bought the March 13 calls back and sold to open the April 13 calls, collecting a net credit of 50 cents per roll to maintain bearishness in the airline name.
The March 13-strike calls have an implied volatility of 33% and implied volatility of the April 13-strike calls is 45%. These levels compared to a 30-day historical volatility of 52%. Investors who rolled out the short call position to April will make money if DAL shares close lower than $13.65 at April options expiration in 30 days.
Keep in mind that this bearish roll factors in a potential 5% rally throughout the near-term before investors begin to lose money. So, at least one investor expects DAL shares to experience limited upside prior to April options expiration.
-- Written by Jud Pyle in Chicago
At the time of publication, Pyle did not have a position in the stock mentioned. Jud Pyle, CFA, is the chief investment strategist for Options News Network. Pyle started his career in finance in 1994 as a derivative analyst with SBC Warburg. After four years with Warburg, Pyle joined PEAK6 Investments, L.P., in 1998 as an equity options trader and as chief risk officer. A native of Minneapolis, Pyle received his bachelor's degree in economics and history from Colgate University in 1994. As a trader, Pyle traded on average over 5,000 contracts per day, and over 1.2 million contracts per year. He also built the stock group for all PEAK6 Investments, L.P. hedging, which currently trades on average over 5 million shares per day, and over 1 billion shares per year. Further, from 2004-06, he managed the trading and risk management for PEAK6 Investments L.P.'s lead market-maker operation on the former PCX exchange, which traded more than 10,000 contracts per day. Pyle is the "Mad About Options" resident expert. He is also a regular contributor to "Options Physics."