Bulls Position for Shares in Delta Air Lines to Fly Higher by End of 2010

DAL – Delta Air Lines, Inc. – Shares of the leading U.S. carrier to Asia rallied as much as 9.40% this morning to touch an intraday high of $12.80 after the firm posted better-than-expected earnings for the third quarter. Delta recorded an 18% increase in revenue to $8.95 billion, beating average expectations of $8.82 billion in revenue. Excluding one-time items, the Atlanta-based company earned $1.10 a share in the third quarter, which exceeded average analyst forecasts of $0.94 a share. Bullish options traders displayed their delight with Delta Air Lines’ earnings report by scooping up out-of-the-money call options and shedding puts. Investors expecting Delta’s shares to soar to new heights by expiration in the final month of 2010 purchased approximately 10,200 calls at the December $15 strike for an average premium of $0.23 a-pop. Call buyers make money if Delta’s shares surge 19.0% over today’s high of $12.80 to surpass the average breakeven point to the upside at $15.23 by expiration day. Other optimistic options traders sold roughly 1,400 puts at the December $12 strike to take in premium of $0.59 per contract. Investors selling the put options keep the full premium received on the transaction as long as Delta’s shares exceed $12.00 through December expiration. Put sellers appear to be ready and willing to have shares of the underlying stock put to them at an effective price of $11.41 each in the event that the puts land in-the-money by expiration day. Options implied volatility on the U.S. carrier is down 10.3% to stand at 42.22% as of 11:35 a.m. in New York.

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.

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