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LATAM Airlines Call Volume Skyrockets on Delta Nod

Andrea Kramer

The shares of LATAM Airlines Group SA (NYSE:LTM) are among the best of the New York Stock Exchange (NYSE) today, after Delta Air Lines (DAL) took a 20% stake in the Latin American carrier for $1.9 billion. As such, LATAM ended its partnership with American Airlines (AAL), and Delta is selling its stake in Brazilian carrier Gol Linhas Aereas Inteligentes (GOL), with both of those stocks lower on the day. Nevertheless, LTM stock has surged more than 30% so far, and call volume is running at more than 500 times the usual pace.

LATAM Airlines stock was last seen 30.3% higher at $11.74 -- set for its biggest one-day percentage gain ever -- in territory not charted since the first quarter. Further, the security is set to topple its 160-day moving average for the first time in months, after being rejected at this trendline back in July. Plus, more than 5 million LTM shares have traded already today, far surpassing the previous annual high of about 1.6 million shares traded on Nov. 21.

LTM stock chart sept 27

LTM stock typically sees average daily options volume of just three calls and six puts. Today, however, the equity has seen nearly 650 calls and more than 500 put options change hands. As such, both call and put volume are pacing for the 99th percentile of their annual range.

Most popular are the October 12.50 call and the October 10 put. Buyers of the calls expect LTM to soar north of $12.50 before the options expire on Friday, Oct. 18, while the put buyers expect the shares to pull back to single-digit territory by options expiration.

Meanwhile, several LATAM Airlines short sellers could be freaking out. Short interest represents nearly 12 days' of pent-up buying demand, at LTM's average daily trading volume.

Several analyst upgrades could be in store, too. Prior to today, not one of the five brokerage firms following the airline stock deemed it worthy of a "buy" or better rating. Already today, though, J.P. Morgan Securities upgraded LTM to "neutral" from "underweight," and lifted its price target to $14 from $10.