American Airlines Stock (AAL): Out Of Gas Or Ready To Fly?

This post was originally published on SeeItMarket.com on May 3rd, 2016

Despite topping Q1 EPS estimates and authorizing a $2B share repurchase program, investors in American Airlines stock (AAL) haven’t been impressed by the company’s performance.

Lower fuel prices have been a tailwind for the largest airline in the world, but revenue fell 4% in the first quarter. Consequently, consolidated passenger yield dipped 7.5% to 15.62 cents.

With oil prices back on the rise in recent months, has American Airlines stock priced in the worst case scenario or is there more downside to come?

Let’s take a look at the AAL chart.

Chart overview:

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AAL shares are trading down 37%+ from the all-time high hit in 2015; 18% year to date

American Airlines … Read More »

Options Report

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Unusual Options Activity

American Airlines (AAL)- A rollout from 20,000 Apr 17 $52.50 calls ($0.80 credit) into 20,000 May 15 $52.50 calls ($2.14 debit). Shares are being hit today, following the downgrade to hold from buy at Deutsche Bank (price target slashed to $58 from $78).
CVS Health (CVS)- 3,370 May 8 weekly $98.50 puts were sold for $1.20-$1.23. There has been consistent put selling for months now.
LifeLock (LOCK)- 30,000 May $13 puts were sold for $0.35, against open interest of 21,550 contracts. Sizable selling in these on March 24th-26th for $0.45-$0.50. Earnings are due out near the end of this month.
Rowan Companies (RDC)- 10,000 Jan 2016 $13 puts were purchased for $0.95. The stock lost its early gains after the put purchase as the longer-term downtrend is still in place. 2015 EPS estimates have been cut by 18% in the last … Read More »

Options Report

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Unusual Options Activity

American Airlines (AAL)- A rollout from 8,000 Mar 27 weekly $53 puts ($0.44 credit) into 8,000 Apr 10 weekly $52 puts ($0.88-$0.92 debit). Shares continue to struggle to sustain moves above the $55-$56 resistance level.
Entergy (ETR)- 1,000 June $82.50 calls were bought for $0.90-$1.00 each. Typically trades 169 calls per day. The 14%+ decline since December has brought the dividend yield up to 4.27%.
iShares MSCI Japan ETF (EWJ)- 20,893 Apr 2 weekly $12.50 calls were sold for $0.39 each, against open interest of 85,837 contracts. Traders started purchasing these calls in size on February 19th for $0.11-$0.16.
NRG Energy (NRG)- 2,000 Apr $25 puts were sold for $0.67 each. This trader is betting on $25 being the floor in NRG Energy through April options expiration, but if it does in fact close below the strike price on expiration he/she … Read More »

Unusual Options Activity

American Airlines Group (AAL)- A rollout from 2,000 Mar 20 $50 calls ($2.89 credit) into 5,000 May 15 $57.50 calls ($1.74 debit). It was announced yesterday that (AAL) will be replacing Allergan (AGN) in the S&P 500.
HCP Inc (HCP)- Another 1,000+ Apr $42.50 calls were bought for $0.35-$0.40 each early this morning, against open interest of 14,788 contracts. There was big buying in these calls yesterday.
ING Groep NV (ING)- 14,000 Oct $15 calls were purchased for $0.87-$1.00 each. Call activity was 54x the average daily volume. Prior to this action, total call open interest was just 6,941 contracts.
Medtronic (MDT)- Another 1,000 Mar 27 weekly $75.50 puts were sold for $0.50-$0.51 each (4,250 were sold for $0.98 each on 2/18). Analysis on (MDT) from 3/13
Consumer Discretionary Select Sector SPDR Fund (XLY)- Another 20,000 June $73 outs were bought for … Read More »

Smart Money Report

AAL- A rollout from 5,250 Dec 12 weekly $48.50 calls (credit) into 7,500 Jan 9 weekly $52.50 calls (debit). Volume was above the open interest in the Jan 9 weekly $52.50 calls. There have been several of these type of rolls in American Airlines in the last two weeks. On December 2nd, Credit Suisse raised their price target to $58 from $55. My article on (AAL) from November 27th
AMAT- Another rollout from 32,000 Apr 2015 $23 calls (credit) into 50,000 Apr 2015 $25 calls (debit). Volume was below the open interest in both options. Applied Materials shares are up for the 8th consecutive week, but just recently broke out above the $23 resistance level.
IMMU- Sizable buying in the May 2015 $7 and $8 calls today. Volume was above the open interest in both options. Call activity is 15x … Read More »

Low Oil Prices Translate To Big Profits For American Airlines
My article on American Airlines Group (AAL) for Seeking Alpha

On October 23rd, American Airlines Group (NASDAQ:AAL) reported Q3 EPS of $1.66 per share vs. the Wall Street consensus estimate of $1.63 per share and revenue of $11.14B vs. the estimate of $11.16B. On a year over year basis net profits rose 59% and revenues increased 4.4% (operating income topped $1.3B). This marked the fourth straight earnings upside surprise since the December 9th completed merger (listed on the NASDAQ the same day) with US Airways Group that created the largest airline company in the world. Year to date, total shareholder equity has gone from -$2.73B to $4.97B, which can largely be attributed to a decline in liabilities. From the opening print late last year, shares of the Fort Worth, TX-based $32B airline … Read More »

Smart Money Report

AAL- A likely rollout from 3,500 Dec 5 weekly $46.50 calls (credit) into 4,880 Dec 5 weekly $48.50 calls (debit). Volume above the open interest in the Dec 5 weekly $48.50 calls. My article on American Airlines from Thursday
LGF- 7,000 Dec $37 calls were bought for $0.40 each, against open interest of 12,306 contracts. There was large buying in these Lions Gate Entertainment calls on November 20th. Implied volatility initially rose 9.4% to 38.66. Shares of (LGF) are now retesting the $35-$36 resistance level.
MRO- A rollout from 2,000 Dec 20 $31 puts (credit) into 3,500 Jan 17 2015 $27 puts (debit). Volume was above the open interest in the Jan 17 2015 $27 puts. This trader is taking profits on the December Marathon Oil puts and is extending the trade an additional month with expectations of new lows … Read More »

 Unusual Options Activity

In today’s Unusual Options Activity Report we highlight a call rollout in American Airlines (AAL) and put selling in the Market Vectors Russia ETF Trust (RSX).

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 Unusual Options Activity

In today’s Unusual Options Activity Report we highlight call buying in American Airlines (AAL) and Whole Foods Market (WFM).

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Smart Money Report

AAL- 3,000 Oct 31 weekly $32.50 puts were purchased for $2.25 each, against open interest of 127 contracts. Earnings are due out on 10/23. The stock is on pace to close below the $32 support level from April. Given how the puts are in-the-money already it is unlikely to be a hedge on American Airlines.
CSCO- 7,500 Jan 2015 $25 calls were purchased for $0.48 each, against open interest of 85,742 contracts.
CSCO- 10,000 Dec $25 calls were purchased for $0.44-$0.47 each, against open interest of 6,291 contracts. Following the lower guidance from Microchip Technology (MCHP) this morning, maybe tech stocks including Cisco Systems had a sizable pullback.
CZR- 5,000 Dec $10 puts were bought for $1.65-$1.75 each, against open interest of 5,044 contracts. The casino stock bear market (Caesars Entertainment included) has been in place since late Q1.
RICE- A rollout … Read More »

Unusual Options Activity

In today’s Unusual Options Activity Report we highlight put buying in American Airlines (AAL) and Caesars Entertainment (CZR).

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Smart Money Report

AAL- The Jan 2015 $32/$40/$45 bull call spread risk reversal was put on 8,000 times for a $0.26 debit. Volume was above the open interest in the Jan 2015 $32 puts. American Airlines Group remain weak despite weakness in oil & gas prices. The stock could retest the Aug 8 lows above $35, if it is unable to hold above the $37 level support level.
BAC- A rollout from 10,000 Sep 20 $17 calls (credit) into 10,000 Sep 26 weekly $17 calls (debit). Volume was below the open interest in both options. Option traders/investors remain bullish on Bank of America in the near-term and long-term (out to early 2016).
BUD- A rollout from 2,000 Sep $115 calls (credit) into 2,000 Oct $120 calls (debit). Volume was above the open interest in the Oct $120 calls. Anheuser-Busch InBev SA is reportedly looking … Read More »

Unusual Options Activity

In today’s Unusual Options Activity Report we highlight a bull call spread risk reversal in American Airline (AAL) and call buying in Bank of America (BAC).

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Smart Money Report

AAL- 10,000 Nov. $40 calls were bought for $5.52-$5.60 each, against open interest of 1,844 contracts. Uptrend on the daily and weekly charts remain intact with major support at the $40 level. American Airlines trades at a P/E ratio of 7.01x (2015 estimates) with 16.2% EPS growth, 5% revenue growth, P/S ratio of 1.03x, and has an average analyst price target of $46. On 5/1, (JPM) maintained an overweight rating with a $55 price target.
AVNR- A rollout from 10,000 June $5 calls (credit) into 10,000 Jan. 2015 $6 calls (debit). Volume was above the open interest in the Jan. 2015 $6 calls. Catalysts for Avanir Pharmaceuticals include: http://phoenix.corporate-ir.net/phoenix.zhtml?c=61699&p=irol-newsArticle&ID=1934460&highlight= http://phoenix.corporate-ir.net/phoenix.zhtml?c=61699&p=irol-newsArticle_print&ID=1912540&highlight=
COCO- 2,500 Aug. $1 puts were purchased for $0.25 each, against open interest of 5,528 contracts. Typically trades 263 puts per day.
MGA- 1,000 Sep. $115 calls were bought for $1.85 … Read More »