Delta Air Lines (NYSE: DAL) was on the upswing Monday after the firm raised its forecast for third-quarter margins. The airline issue now expects operating margin of 3% to 4% for the current quarter, compared to its midsummer outlook of 1% to 3%. Third-quarter fuel prices are now expected to average $2.14 per gallon, down from a prior prediction of $2.17.
The update comes courtesy of a regulatory filing, wherein Delta noted that many of its financial metrics are improving on both a sequential and a year-over-year basis. Load factor for September and October is pegged at 82%, narrowly above last year's level. Meanwhile, revenue per available seat mile is expected to decline in the third quarter, but less so than in the second quarter.
DAL added more than 2% in the wake of the news, but Monday's gain is a drop in the bucket compared to the stock's year-to-date loss of nearly 30%. The shares are struggling to surmount the $8.50 region, which has acted as resistance since April.
Despite the stock's troubling technical setup, traders have rushed to buy calls on DAL. The stock's October 9 call saw volume of 5,071 contracts change hands on open interest of just 1,787 contracts, indicating that new positions are being added at this strike. The increasing demand for this out-of-the-money call option has pushed implied volatility up by 3.5% at last check.
Elizabeth Harrow is an analyst and financial writer in the research department at Schaeffer's Investment Research. She is featured in the video series Schaeffer's Daily Q&A on SchaeffersResearch.com.
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