Airlines have been doing well this year and two names in the space are coming into focus today after reporting earnings early this morning. United Continental Holdings, Inc. (UAL) and American Airlines Group Inc.(AAL) are both seeing some unusual options activity in early trading today. Both stocks are trading lower this morning with UAL trading lower by over 6%. Despite the weakness in these names this morning options order flow has been relatively bullish in both names. Early this morning we saw a trader buy 5,000 AAL Apr 25th 38 calls for $0.15. This was labeled as an opening position and with expiration only 1 day away these may be considered “lottery tickets” but the reward to risk ratio is setting up well here if AAL reverses. The action in UAL was smaller with a trader buying 2,000 UAL Jun 45 calls for $2.04. The UAL trader is not likely looking for a quick move higher but a return to pre earnings levels in UAL through June expiration. While these are two very different setups both are looking for a reversal in these names but with two very different time frames.

Block Trades: Trader Bought 5,000 AAL Apr 25th Weekly 38 Calls for $0.15
Risk: $15 per 1 lot
Reward: Unlimited
Breakeven: $38.15

Trader Bought 2,000 UAL Jun 45 Calls for $2.04
Risk: $204 per 1 lot
Reward: Unlimited
Breakeven: $47.04

Andrew Keene


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