In Quick Hits earlier I highlighted a large bullish roll in shares of United Airlines (UAL):
This rolling activity was very prevalent in the run up of airlines stocks from their October lows to the late January highs. For obvious reasons, airline stocks attracted a great deal of interest mid last year as the benefits of lower oil costs, and the potential effects of an Ebola outbreak caused a fairly volatile trading environment.
The chart below of options open interest shows the explosion during the Ebola scare in the Fall, and the subsequent drop in January as UAL was back at multi-year highs. With the stock approaching 2015 lows in the last couple weeks open interest nearly challenged the one year highs made in October. But after June expiration open interest again dropped off (as it does). Will the next move in open interest give us a sense for where the stock is going? It’s hard to tell, but its fun to try to draw some conclusions from this chart:
Regular readers may recognize the one year chart below as the Triangle of Death, with the stock having just bounced off of what we call the Dearly Departure Line (we just made that term up) at $50:
A departure from the triangle at the downtrend, and a breach of important technical support at $50 would likely put the October lows in play on the slightest bit of bad company specific news or a broad market sell of. $45 is the next real support level below $50.
As for options prices, 30 day at the money implied vol at 41% is far from cheap for a $20 billion market cap company. But considering how elevated options prices were (mid 50s) when the stock was at multi-year highs early in the year, and the extreme highs in the Fall, prices look fair for those looking for protection or to express a directional view: