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by Terrence on March 1, 2013

This Trade Was Closed March 5, 2013

Closing this trade in US airways today. I don’t like the very low Implied vols I’m seeing in the March calls. Tells me that it will struggle to get above $14. Poor price action compared with ALK and ALGT – probably were better plays than LCC

Original Trade Post:

Airlines are benefitting from lower oil prices, with WTIC oil prices down about 7% during the month of February.

Large buying going on in the March $14 out of the money calls. Bullish options flow, and the stock is technically starting to break out.

Trade Details

The Ticker: LCC

The Trade
Buy to Open Mar 2013 13 Calls at 1.00 or better

Trade Opened: March 1, 2013
Trade Closed: March 5, 2013

Chart courtesy Finviz. Click to open larger.

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Terrence

LCC opened at 14.50, and is holding the range. I got back into this trade as a calendar spread – short the Mar $15 call @ .18, Long the Sep $15 call @ 1.36. Total debit = $1.18. This trade benefits from this mornings pop in price and implied volatility – selling the front month volatility and going long the back dated month
Terrence

US airways is up to 14.60 in the AH session on a positive mention by Kramer on his show. Bad timing on my part to close this trade out. I did not watch the show so I don’t know what was said. I got out of the trade for 2 reasons – both psychological – 1. the price of the contract was back to even after being down for a few days (and we tend to want to salvage our losers). 2. There is a short time till expiration and I was nervous that we might not get more days like this. 3. I’ve been paying less attention to this position as my attention was spread a little too thing to too many positions and I had less confident in this one as a result. 4. I wanted to raise some capital to deploy it elsewhere and picked this laggard. So all 4 of those things are things I can correct in the future – 1. take more time to make a decent entry (or no entry at all if price gets away fast). 2. Buy a further dated expiration to let the trade work itself out more and buy more delta. 3. have less positions open at once to not spread too thin. 4. trade smaller so I have more capital to deploy
Todd

Aren’t you concerned with the short amount of time until expiration? Wouldn’t it be a better trade looking out to the April calls?
- Terrence
  
  Yes – I agree – it’s always better to buy more time, though the option strike I selected is in the money so there’s intrinsic value in the option premium. In the short-term though there are these tailwinds: cheaper oil prices, impending news on the merger with American Airlines, and headlines of increases in rates for business travelers:
  
  http://www.usatoday.com/story/todayinthesky/2013/03/01/airlines-raise-fares/1956505/