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How Large Boeing, Delta Options Traders Are Positioning As Economy Reopens

Wayne Duggan

Boeing Co (NYSE: BA) shares traded higher by 4.26% on Thursday and Delta Air Lines, Inc. (NYSE: DAL) shares gained 1.94% as the stock market experienced yet another volatile trading session.

A flurry of large Boeing and Delta option trades on Thursday morning were mixed in nature, with one deep-pocketed Boeing bull making a massive bet on a sharp recovery for the stock.

The Boeing, Delta Trades

Benzinga Pro subscribers received 35 option alerts related to unusually large trades of Boeing and Delta options. Here are a handful of the largest:

  • At 9:30 a.m., a trader bought 1,000 Boeing call options with a $130 strike price expiring on May 29 at the ask price of $9.60. The trade represented a $960,000 bullish bet.
  • At 9:50 a.m., a trader bought 1,370 Delta put options with a $45 strike price expiring on Jan. 15, 2021 at the ask price of $23. The trade represented a bearish bet worth $3.15 million.
  • At 10:10 a.m., a trader bought 542 Boeing call options with a $145 strike price expiring on May 29 near the ask price at $4.558. The trade represented a $247,043 bullish bet.
  • At 10:48 a.m., a trader bought 462 Boeing call options with a $150 strike price expiring on Jan. 15, 2021 near the ask price at $27. The trade represented a bullish bet worth $1.24 million.

Of the 35 total large Boeing and Delta option trades on Tuesday morning, 20 were calls that were purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The remaining 13 trades were calls sold at or the near the bid or puts purchases at or near the ask, trades typically seen as bearish.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large sizes of the largest Boeing and Delta trades, they could potentially represent institutional hedges.

Travel Stocks In Limbo

Boeing and Delta shares are each down more than 55% year-to-date, as the COVID-19 outbreak has decimated the travel industry. Back in March, both companies announced they were suspending their buybacks and dividends.

But while the outbreak rages on, travel stocks have gotten a boost in recent days thanks to cautiously optimistic signs the economy is opening back up and potential progress on developing a COVID-19 vaccine.

On Thursday, Credit Suisse initiated coverage of battered travel stocks Royal Caribbean Cruises Ltd (NYSE: RCL) and Norwegian Cruise Line Holdings Ltd (NYSE: NCLH). In addition, RBC initiated coverage of Boeing with an Outperform rating.

Although the near-term outlook for travel stocks will continue to be difficult, analysts seem to see the downturn as fully priced into the stocks. Instead, they are focusing more on a potential bullish long-term risk-reward skew.

Bullish sentiment among StockTwits messages mentioning Boeing was at 80.9% on Thursday, its highest level of 2020.

  BA Chart by TradingView new TradingView.widget( { "width": 680, "height": 423, "symbol": "NYSE:BA", "interval": "D", "timezone": "Etc/UTC", "theme": "light", "style": "1", "locale": "en", "toolbar_bg": "#f1f3f6", "enable_publishing": false, "allow_symbol_change": true, "container_id": "tradingview_a50c0" } ); Benzinga’s Take

While the majority of the large option trades in Boeing and Delta on Thursday morning were bullish, the largest trade was the $3.1 million bearish Delta put purchase. The break-even price for those puts is $22, suggesting at least 5.1% downside for Delta shares over the next eight months.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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