Giant Options Trade Looks for a Happy New Year in Discount Airline

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Giant Options Trade Looks for Happy New Year in Discount Airline

Someone’s looking for a a beaten down airline to take off in the New Year.

Record-setting call volume was detected today in Spirit Airlines (SAVE), with traders amassing over 25,000 January 45 calls. The initial blocks priced for $0.20, and then premiums doubled to $0.40 and $0.50 as the orders flowed in. Activity was more than 20 times previous open interest, a sign of new money being put to work.

Calls fix the price where a stock can be purchased. They can appreciate in value, sometimes sharply, when the underlying shares rally. But without a move to the upside they’re at risk of expiring worthless.

SAVE rose 1.7 percent to $41.09 in afternoon trading. It was lower initially lower but turned higher after the calls hit.

Spirit Airlines (SAVE) chart with 50-day moving average and call volume.
Spirit Airlines (SAVE) chart with 50-day moving average and call volume.

The discount airline has been sitting at the bottom of its longer-term range between $35 and $40 since September. Investors have worried about weak pricing, but its last earnings report on October 23 beat estimates.

Today’s trader apparently thinks SAVE will rebound in the next month, possibly moving toward its bearish gap from July 25.

Overall options volume is more than 25 times the monthly average in the name. Calls account for a bullish 98 percent of the activity.

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David Russell is VP of Market Intelligence at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.