Call Traders targets airliners after acquisition deal
JetBlue Airways to buy Spirit Airlines for $3.8 billion
Spirit Airlines Incorporated (NYSE: SAVE) and JetBlue Airways Corporation (NASDAQ:JBLU) are in the spotlight today, after an update in the endless redemption battle between JetBlue and Frontier Group (ULCC). Spirit and Frontier have ended their merger agreement Wednesday, and today it was announced that JetBlue had reached a $3.8 billion deal to buy the jetliner at a discount. The merger will likely face intense scrutiny from regulators, but if approved, it would create the fifth-largest airline in the United States. At last glance, SAVE is up 3.8% to trade at $25.23, while JBLU is up 0.7% at $8.46.
JetBlue stock has struggled to rebound from its two-year low of $7.87 on July 15, with air pressure at the 40-day moving average. The $8 level, however, seems to have come back as support. Since the start of the year, shareholders’ equity is down 41%.
SAVE has held up better on the charts, up 11.2% since the start of the year, although this period has been marked by great volatility. Meanwhile, although shorts have been buying up their bets, with short interest down 42% over the past month, the 5.62 million shares sold short still represent 5.2% of the market’s available float. ‘stock.
Airliners are seeing a lot of bullish attention in the options pits after the news. SAVE has seen 8,579 calls traded so far today, 11 times the intraday average, compared to just 978 puts. Meanwhile, JBLU calls are running at double what is typically seen, with 3,390 on the band compared to 377 puts. The most popular SAVE contract is the 7/29 26-strike weekly call, expiring tomorrow.
Both companies are also gearing up for their second quarter earnings reports. JetBlue’s report is due out before the market open on Tuesday August 2, while Spirit Airlines is expected to announce its results before the market open on Tuesday August 9. Both stocks have shaky post-earnings histories, however, with SAVE finishing three of its last eight overnight sessions higher, and JBLU just two of the last eight.