UAL – United Continental Holdings Inc. – Airline stocks are bucking the trend on Thursday, flying high amid a down day for U.S. equities. Shares in United Continental Holdings increased as much as 12.6% during the first half of the session to a record high of $46.19 following the release of the company’s December operational results and after several analysts raised their fourth-quarter earnings estimates on the carrier.
Trading in UAL call options expiring this month and next suggests some traders may be positioning for the price of the underlying to continue to climb in the near term. The 17 Jan ’14 $46 and $47 strike calls traded more than 900 times by midday in New York, trumping open interest levels in each case. Time and sales data suggests most of the calls were purchased, with the average asking premium paid for the $46 strike calls near $0.83 each and $0.39 per contract on the $47 strike calls as of the time of this writing. The 21 Feb ’14 $46 strike call options also attracted fresh interest, with around 1,400 lots traded against open interest of 100 contracts. It looks like most of the volume was purchased at an average premium of $2.27 each. Traders snapping up the February expiry $46 calls may be looking for the stock to rally leading up to and perhaps following the company’s fourth-quarter earnings report, which is likely to be released in two weeks time. Buyers of the Feb $46 calls stand ready to profit at expiration next month in the event that UAL shares rally 7.6% over the current price of $44.85 to exceed the average breakeven point on the upside at $48.27.
