Creative Sales Tactic Draws Call Buyers on JetBlue (JBLU)

08/24/2009 10:48 am EST


Elizabeth Harrow

Director of Digital Content, Schaeffer's Investment Research, Inc.

JetBlue Airways Corporation (JBLU) grabbed headlines this past Thursday after its $599 unlimited one-month travel pass sold out early. Option players apparently took notice, as the airline issue garnered a wave of bullish volume on the International Securities Exchange (ISE).

JBLU price chartSpecifically, traders on the ISE Thursday bought to open 1,557 calls, compared to just one put. As a result, the equity's ten-day ISE call/put volume ratio now stands at a new annual high of 249.50. In other words, option players are snapping up calls over puts at a faster pace now than at any other time during the past year.

Most active on Friday was JBLU's January 2010 6 call, where 5,402 contracts traded on open interest of just 151 contracts. Several large block trades totaling almost 5,000 contracts changed hands at the ask price, revealing a bias toward buying activity, and implied volatility on this LEAPS option rose 2.7% as a result. Open interest at this strike rose overnight and now stands at 5,456 open positions.

Friday's crop of bullish speculators is betting that JBLU can continue its recent show of strength on the charts. Since late June, the shares have marched higher along support at their ten- and 20-day moving averages. The stock's momentum has stalled somewhat near the $5.50 region, but it's back on the upswing today amid a broad-based rally.

This positive price action has forced some short sellers out of their bearish positions, with short interest tumbling by nearly 13% during the most recent reporting period. With a substantial 10.6% of JBLU's float still dedicated to short interest, the equity stands to gain considerably from a continuation of this trend.

By Elizabeth Harrow of Schaeffer’s Trading Floor Blog

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