American Airlines Group (AAL) stock has been trading in a range over the past year. One trader sees shares breaking out and moving higher in the months ahead.
That’s based on the September $21 calls. With 196 days until expiration, 32,532 contracts traded compared to a prior open interest of 490, for a 66-fold rise in volume on the trade. The buyer of the calls paid $0.54.
The airliner recently traded for about $16, so shares would need to rise by $5, or about 31 percent, for the options to move in-the-money. That would also see shares move close to their 52-week high of $21.42.
American Airlines has been impacted by the slowing economy. Despite revenues rising by 40 percent over the past year as travel demand has risen, the airliner didn’t turn a profit. And factors such as a decline in demand and higher fuel costs could weigh on profitability this year.
Action to take: Investors should be wary of shares, even though they’ve been in an uptrend here. It’s most likely that shares will bounce back and forth, rather than find a strong direction this year.
For traders, the September calls could be a worthwhile trade given their low price and the fact that shares are in an uptrend right now. But traders will likely want to take a quick, mid-double-digit profit, and move on to the next trade.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.