In yesterday’s piece, I started an exploration of airline stocks because the need to travel by air will increase and the volume of air travels is likely to increase as the holiday season continues and as we prepare to enter into the Christmas holidays. I also mentioned the fact that an increase in air travel traffic will also lead to an increase in revenue per passenger for airline stocks and thus, we should look for possibilities for profiting with options in the airline industry.
We will continue that series today as we examine the options of Delta Air Lines, Inc. (NYSE:DAL). Delta Air Lines with its market capitalization of $38.45B provides scheduled air transportation for passengers and cargo throughout the United States and around the world. The Company’s route network gives it a presence in every domestic and international market.
Delta’s route network is centered around the hub system it operate at airports in Amsterdam, Atlanta, Cincinnati, Detroit, Memphis, Minneapolis-St. Paul, New York-JFK, Paris-Charles de Gaulle, Salt Lake City and Tokyo-Narita
Is Delta Air Lines a Bull or Bear?
The chart below shows how Delta Air Lines have traded in the last one year. You will observe that the share price has appreciated by 66.08% and its revenue has increased by 5.34%. You will observe that shares of Delta Air Lines have gained 87.95% from a 52-Week low of $26.40 to a 52-Week high of $49.62.
Interestingly, the stock’s current trading price of $46.37 is at an 11.89% premium to its 50-day moving average and at a 20.62% premium to the 200-day moving average. You will also observe that the stock trades with an RSI of 55.53, which suggests that the stock’s recent bullish rally is still strong and we can expect to see some more gains before it enters overbought territory.
Reasons to Buy DAL Call Options
The first reason I am optimistic about Delta Airlines is how the continued drop in oil prices could lead to an increase in profitability for the company going forward. I yesterday’s piece, I mentioned the potential increase in the number of people flying during the holidays. I also affirmed that Data from the International Air Transport Association (IATA) shows that the association expects airline profits to rise 10.6% on an annual basis to $19.9B this year up from the $18.0 forecast that was given in June.
The expected increase in profits for airline companies is linked to the massive fall being recorded in global oil prices. You will remember that global oil prices have been falling steadily in the last couple of months as supply continues to outpace the demand. Interestingly, the drop in oil prices invariably means that Delta Airlines will be able to recording lower operating costs and attract more flyers with consistently low airfares.
The second reason I am optimistic about Delta Air Lines is the positive analysts’ vibes that surround the stock. Delta Air Lines currently has a Zacks Number 1 rank, which indicates a “Strong Buy” proposition. In addition, analysts’ at Zacks have an “Outperform” Rating on the stock as an indication of positive expectations in the New Year.
How to Trade DAL Options
I am bullish on Delta Air Lines and I recommend buying DAL call options. I am specifically interested in the DAL Mar 2015 48.000 call at an asking price of $3.25.
— Daily Option Alerts