DAL Analysis

Delta Air Lines Inc. (DAL)

Update 10/19/2017: DAL hit the consensus earnings forecast almost on the mark, coming in at $1.57 per share. The price closed the session immediately after earnings were announced up $0.37, within the central tendency and the average of the the past year’s post-earns moves.

I opted for a directional, bearish trade, which means the position lasted longer than with my direction-neutral plays. The price the next day out moved contrary to my position, rising about a dollar, and then began a four-day decline that brought the position near my profit goal. I exited a 49.1% of maximum potential profit.

Zacks had scored DAL as very bearish, with no earnings surprise expected. The surprise part turned out to be correct. And in Elliott wave terms the post-earns trend has been bearish, since the downward turn occurred below the prior peak of $55.75.

Shares declined by 3.3% over nine days, or a -135% annual rate. The options position produced a +97% return for a +3,916% annual rate.

DAL publishes earnings on Wednesday before the opening bell.

I  shall use options that trade for the last time 39 days hence, on Nov. 17. I’m going further out than is my usual practice on earnings plays because I have concluded that a bearish directional position best suits DAL’s prospects.

Implied volatility stands at 29%, which is 2.8 times the VIX, a measure of the volatility of the S&P 500 index.

DAL’s IV stands in the 32nd percentile of its annual range and the 71st percentile of its most recent broad movement.

The price used for analysis was $53.00.

Premium: $0.57 Expire OTM
DAL-vertical Strike Odds Delta
Long 57.50 68.7% 34
Break-even 55.57
Short 55.00 84.5% 18

The premium is 22.8% of the width of the position’s wing.

The risk/reward ratio is 3.4:1.


The bid/ask spread is 6.9%.

Decision for My Account

I have entered a bear position on DAL as described above. The stock at the time of entry was priced at $53.04.

By Tim Bovee, Portland, Oregon, October 10, 2017


Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

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