United and Continental are benefiting from a stock surge, according to optionMONSTER, which reported they are benefiting from an improving outlook for the sector. “Call volume in the sector exceeded puts by almost 4 to 1 yesterday, according to optionMONSTER's Heat Seeker tracking program. That was the most bullish ratio for any industry group that traded at least 10,000 contracts in the session,” it said, adding United was the most active.
“United [received] heavy demand for the January 9 calls. The options traded for 11,556 times for $0.30 to $0.45 against open interest of 3,902 contracts. UAUA, which began yesterday down 21 percent in the previous two months, rallied 7.03 percent to $7.76. Other stocks that enjoyed bullish activity included American (AMR), Continental Airlines (CAL), and Delta (DAL), though volume was below open interest in most of the contracts that traded.”
The site noted that the sector was up 12% in the last month – more than twice the S&P 500 index, as measured by the Claymore/NYSE Arca Airline (FAA) exchange-traded fund. In addition to ancillary revenue, option MONSTER cited the inability of fuel to rise about USD80 per barrel crude.
“Overall in the sector, options volume was 51 percent greater than average, while total activity in the options market was about 18 percent below normal,” it said. “The nature of the trading was also positive in the group, with much more call buying than selling. The opposite was true for puts, which faced selling pressure, according to optionMONSTER data.
MarketWatch indicated stocks were boosted because Continental is expected to report improved revenue trends for November. It noted the carrier was one of the few to report unit revenue and cost trend data.
“Relative to their pre-earning positions in October, legacy shares have shed about 15%, ranging from a 2% decline for UAL to a 26% drop for AMR, according to JP Morgan’s JamieBaker,” it said. “The benchmark Standard & Poor's 500 Index, meanwhile, has been virtually flat.” Baker had no explanation for the “disconnect between equities and fundamentals should continue.”