Long Puts on UAUA/CAL?

K

kidofstreet

Howdy all,

Still new to options (please forgive my newbishness), but with oil hitting new highs now...if it hits $100 by May-Jun, airlines would be hit would they not? Both UAUA and CAL have hit 52 week highs, what do you all think about Jun/Jul OTM puts now?

Pretty stoked though, I've got McMillan on Options, Options Pricing & Volatility, and The Options Trader Handbook on order, should be showing up sometime next week.

TYIA

kos
 
Quote from kidofstreet:

Howdy all,

Still new to options (please forgive my newbishness), but with oil hitting new highs now...if it hits $100 by May-Jun, airlines would be hit would they not? Both UAUA and CAL have hit 52 week highs, what do you all think about Jun/Jul OTM puts now?

Pretty stoked though, I've got McMillan on Options, Options Pricing & Volatility, and The Options Trader Handbook on order, should be showing up sometime next week.

TYIA

kos
More...

Hi KOS,

Your list of books is fine. But you need a beginner's book (Rookie's Guide - I wrote it).

Nice to be 'stoked' but if you believe you are going to make money by buying out of the money options, you are sadly mistaken.

Options are designed to reduce risk and if you take high risk plays (high probability of losing your entire investment), you will have some nice wins, but your money is likely to slowly disappear.

Best of luck.
Mark
 
Quote from dagnyt:

Hi KOS,

Your list of books is fine. But you need a beginner's book (Rookie's Guide - I wrote it).

Nice to be 'stoked' but if you believe you are going to make money by buying out of the money options, you are sadly mistaken.

Options are designed to reduce risk and if you take high risk plays (high probability of losing your entire investment), you will have some nice wins, but your money is likely to slowly disappear.

Best of luck
Mark
More...
Hi Mark,

I know you're right...and I made $90k this month alone on goog Mar otm calls mostly due to luck and its upward momentum; just wanted to float other ideas as I start to delve a little further into options trading.

Appreciate the post, thanks.
 
I'm short those two stocks as of Friday. Airlines are about as extended as I would expect them to get and would expect they could have a pullback soon. But they are short killers and I have lost money picking tops in them this year.
 
Even if oil hits 100, but if economy continues to improve and more people start using Air travel, airlines are going to make money.
 
I like the idea, too, and I watch the airlines frequently for a sign of a reversal to swing trade, because percentage-wise they really move!

But I think with all the airline good news, and price targets just now starting to be raised (UAUA was just raised to $30 from $24 by UBS), and the very high short interest in airlines, you don't want to jump in too early. I may be wrong, but it doesn't yet feel like we've reached that zone of breathless exuberance, where price is bid up like crazy and the analysts start piling on to raise targets and issue upgrades, and you actually become scared to short it. (When that happens, the top is in.)

Price broke out recently and the next resistance zone is $22-$24 for UAUA. UAUA's 2011 earnings projections are not all that far from 2007's earnings projections when UAUA traded above $50. So look at this from the crowd's point of view: Still bargain-priced.

Technically, CAL and UAUA are very overbought and "due" for a pullback to their 20-day moving averages. So if you're looking for a counter-trend entry, this is as good a time as any.

But if you're going to pay premium for back month options, you want to wait for a confirmed reversal IMHO and let the trend be your friend.
 
Quote from Kedwards:

Will the snowstorms/travel downtime earlier this year have any affect on earnings? pre-announcements?
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The airlines have already reported their weather-based loss estimates, so that should be priced in.
 
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