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Managing a winning trade in Delta

David Russell (david.russell@optionmonster.com)

Delta Air Lines has been flying high, and one trader is sharpening up a winning bet.

optionMONSTER's trade scanners detected the sale of 5,000 January 2015 20 calls for $8.56 and the purchase of an equal number of June 30 calls for $1.98. Volume was below open interest in the 20s, so it appears an existing long-call position was closed and rolled up to the 30s in nearer-dated contracts.

Making the adjustment generated a credit of $6.58, more than three-quarters of the capital at risk. But the trader only lowered the delta from 0.83 to 0.40, a little more than half. That means he or she is getting more bang for the buck and will lose much less money if the airline stock drops. (See our Education section for more on how to manage trades more effectively with options.)

DAL declined 0.74 percent to $26.68 yesterday but is up more than 100 percent so far this year. It's been surging along with other airlines, propelled by increased travel, busier flights, and better margins.

Total option volume was slightly above average in the company yesterday, with calls outnumbering puts by almost 2 to 1.

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