AMR Shares Rally on Stake Talk Speculation

AMR – AMR Corp. – Shares of the owner of the second-largest U.S. airline rallied as much as 6.8% this morning on speculation that Emirates, which is the biggest airline by international traffic, could be interested in purchasing a stake in AMR Corp. The rumors have since been dispelled by the Dubai-based company after Emirates’ President, Tim Clark, stated the firm “certainly wouldn’t be doing that” in reference to the takeover chatter. AMR’s shares have since retained a 3.65% rally on the day to trade at $6.26 as of 12:50 pm ET. Earlier in the session it seems the unconfirmed takeover speculation and the shift higher in the price of the underlying stock inspired frenzied call buying on the operator of American Airlines in the September and October contracts. Traders bought approximately 9,100 calls at the September $7.0 strike for an average premium of $0.12 apiece. More than 15,400 calls changed hands at the September $7.0 strike by 1:00 pm ET. Call buyers are positioned to make money as long as AMR’s shares rally above the average breakeven price of $7.12 by expiration day next month. Bulls also looked to the higher October $8.0 strike to purchase roughly 1,100 calls for an average premium of $0.10 a-pop. AMR’s shares would need to jump 29.4% over the current price of $6.26 in order for October $8.0 strike call buyers to start to make money above the average breakeven price of $8.10 by expiration day. Although the takeover rumors were denied by Emirates earlier today, options implied volatility on AMR Corp. is still up 14.4% at 61.89% as of 12:55 pm ET.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

Visit: Interactive Brokers

Be the first to comment

Leave a Reply

Your email address will not be published.


*