Which of These Airlines Isn’t Like the Others?

by Ken Trester | October 9, 2012 9:11 am

Which of These Airlines Isn’t Like the Others?

I noted last week[1] that airlines were one of the sectors setting up for a slowdown in Q4. Just like they did in 2011, airline stocks aren’t showing much strength. Although some signs[2] say things will improve in the long term, in general these airline stocks are best suited for short-term plays[3].

AMR (PINK:AAMRQ[4]), more commonly known as American Airlines, is among the weakest in the sector. With a current price of about 40 cents trading on the Pinks and extremely low volatility, it’s not getting off the ground anytime soon.

Southwest Airlines (NYSE:LUV[5]) has decent volatility, trading anywhere between $7 and $9. I see moderate downside potential here, which you can take advantage of with puts in the short, medium and long term.

I see JetBlue (NASDAQ:JBLU[6]) struggling to go up without much success. Though it isn’t quite as bad as AAMRQ, my Power Options Stocks system rates its volatility at 29, below average.

And then there’s Delta Air Lines (NYSE:DAL[7]). It’s up 5% over the past month, and my system shows it has a volatility rating of 107 (keep in mind that average volatility is 35). I see the bullish trend continuing, especially in the short term. Be on the alert to buy this one on further strength, or take the more economical route of trading calls on it.

Ken Trester[8] is editor of the popular Maximum Options[9] program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.

Endnotes:
  1. last week: http://investorplace.com/2012/10/q4-caution-weak-sectors-to-scrutinize/
  2. some signs: http://investorplace.com/2012/10/pricing-power-lifts-airline-earnings-outlook/
  3. are best suited for short-term plays: http://www.cbsnews.com/8301-505123_162-57333012/why-would-anyone-buy-an-airline-stock/
  4. AAMRQ: http://studio-5.financialcontent.com/investplace/quote?Symbol=AAMRQ
  5. LUV: http://studio-5.financialcontent.com/investplace/quote?Symbol=LUV
  6. JBLU: http://studio-5.financialcontent.com/investplace/quote?Symbol=JBLU
  7. DAL: http://studio-5.financialcontent.com/investplace/quote?Symbol=DAL
  8. Ken Trester: http://investorplace.com/2011/06/author/Ken-Trester/
  9. Maximum Options: https://order.investorplace.com/index.jsp?sid=WRC177&uid=208.250.100.2-1292420591507798

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