Traders are betting on higher oil prices and losses for airline stocks after President Donald Trump declared the ceasefire with Iran over.
There’s just one big catch. That’s because airline stock prices have risen since the war began.
of US Global Jets ETF The stock fell 4% on Wednesday, its second day of declines after hitting a new all-time high last week. The group is up 10% since the U.S.-Iranian war began on Feb. 28, and as of last week, oil prices had soared 78% before the gains completely disappeared.
Options trading in both oil and airline stocks suggests consumers may want to brace for a new resurgence in price volatility due to the conflict. Put purchases accounted for nearly 75% of all options trades on JETS on Tuesday, with volume nearly double the 30-day average, according to data from ThinkOrSwim and Cboe LiveVol. In the U.S. oil ETF USO, traders bought more than 32,000 calls compared to just over 5,000 puts.
US Global Jets ETF Year-to-date
“We are poised for a severe short squeeze,” Phil Streible, chief strategist at Blue Line Futures, said by phone. “The bears were waving the white flag, which caught me completely off guard.”
Investors looking for clarity on what the recent flare-up in conflict means for airline travel demand and input prices won’t have to wait long. delta airlines Earnings will be reported before the opening bell on Friday.
Airlines have blamed warm weather and strong consumer demand for the company’s stock, which has risen 25% since the beginning of the year, nearly triple the return of the S&P 500. Options traders expect Delta stock to move 6% after earnings, compared to a median realized value of 4% over the past year.
DAL option put purchases on Wednesday were more than three times more expensive than call purchases, making calls the most popular directional trade.
Still, there was a notable contrarian in Flo. The biggest trade of the day was actually a call buyer who spent almost $800,000 to scoop up 800 of the 90 calls expiring next January, contracts that would require an 11% appreciation to pay them off.
