Continental Airlines (NYSE: CAL - option chain) shares are soaring higher today after the company announced that it expects more than $100 million a year in fees and savings by charging travelers to check luggage. Obviously, checked luggage fees irritate travelers, but it is good for the company, then it should be good for the stock, and if you make a little money on the stock then you can afford to pay the extra fees and maybe even a mini-bottle of whiskey too. CAL is also getting a lift today from the drastic slide in oil prices, which have almost dropped below $100. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
CAL opened this morning at $15.52. So far today the stock has hit a low of $15.13 and a high of $17.90. As of 12:10, cAL is trading at $17.62, up $1.55 (9.6%). The chart for CAL looks neutral and S&P gives CAL a 3 STARS (out of 5) hold ranking.
For a bullish hedged play on this stock, I would consider an October bull-put credit spread below the $10 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make an 8.7% return in just five weeks as long as CAL is above $10 at October expiration. Continental would have to fall by more than 43% before we would start to lose money. Learn more about this type of trade here.
CAL hasn't been below $10 since mid-July and has shown support around $15 recently. Brent Archer is an options analyst and writer at Investors Observer.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in CAL.
Continental (NYSE: CAL) announced it plans to reduce its work force by 3,000 jobs and its Q4 domestic departures would be 16% lower than a year earlier.
CAL closed at $14.50 Wednesday. WTI Crude oil is recently up 0.20% to $122.54 according to Bloomberg.
CAL July option implied volatility of 97 is above its 26-week average of 80 according to Track Data, suggesting larger risks.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
The Charleston Gazette reported that Chesapeake Energy Corporation (NYSE: CHK) has decided not to build its Eastern Division headquarters in Charleston, West Virginia in the wake of a West Virginia Supreme Court ruling on May 22.
WEB SITES:
AppleInsider reported that Apple Inc (NASDAQ: AAPL) is expected to announce a back-to-school deal soon that will encourage students to buy new Macs by offering some of the largest incentives in the history of the company.
The Wall Street Journal reported that KKR Financial Holdings LLC (NYSE: KFN), a unit of Kohlberg Kravis Roberts, revived concerns of a credit crunch after it asked for a restructuring of billions of dollars in short-term debt.
The Associated Press reported that the pilots' unions of Delta Air Lines Inc (NYSE: DAL) and Northwest Airlines Corporation (NYSE: NWA) are unable to agree on how seniority for the companies' pilots would work under a combined carrier. The impasse puts the deal in "serious jeopardy," inside sources reported.
CAL and United Airlines (NYSE: UAUA) are in advanced negotiations and could complete a combination quickly if Delta (NYSE: DAL) and Northwest Airlines (NYSE: NWA) strike a deal, says Dow Jones.
WTI Crude oil is recently up .12% to $95.57 according to Bloomberg.
CAL March option implied volatility of 71 is above its 26-week average of 58 according to Track Data, suggesting larger price movement.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
Bloomberg reported that Berkshire Hathaway Inc (NYSE: BRK.A) Chairman Warren Buffett forecast that the dollar's value is likely to decline if policies remain unchanged and said he believes a credit crunch is not under way.
Tech Crunch reported that either Google Inc (NASDAQ: GOOG) or News Corp's (NYSE: NWS.A) MySpace is likely to announces a social space acquisition in the near-future. According to industry sources, the acquisition could be in the $1B-$1.5B range and may involve Bebo.
Continental Airlines, Inc. (NYSE:CAL), like many of its competitors, has suffered through another year of stock declines. Hit by surging fuel costs and a slowing economy, the carrier's stock has declined by almost 50% since the beginning of the year. The airline has done a good job of diversifying revenue sources. More than 40% of revenue is coming from International routes. These routes have become the bread and butter for most carriers as they are typically full of business travelers. Many of my friends fly Continental to Tel-Aviv, Israel, and they also say that it's just packed with businessmen. With a growing global economy this should be a catalyst for Continental. If, and it's a big if, fuel costs decline, this will help drastically improve margins and the stock price will react in kind.
If you are looking at a way to play the global economic growth game, take a look at Continental.
Aaron Katsman is the lead Portfolio Manager and Managing Director of America Israel Investment Associates, LLC. and Senior Editor of IsraelNewsletter.com. Disclosure: Writer has no position in any stock mentioned as of 12/19/07.
Continental Airlines, Inc. (NYSE: CAL) shares are declining this morning with other airline stocks as oil futures are rebounding from yesterday's drop. The strong showing for oil is due to a pipeline fire in Minnesota. If you think this stock won't be rising too far in the coming months, then it could be a good time to look at a bearish hedged play on CAL.
After hitting a one-year high of $52.40 in January, the stock hit a one-year low of $25.18 last week. This morning, CAL opened at $28.55. So far today the stock has hit a low of $28.50 and a high of $29.09. As of 11:05, CAL is trading at $27.00, down $0.98 (-3.5%). The chart for CAL looks bearish and steady, while S&P gives the stock its highest 5 STARS (out of 5) strong buy rating.
MOST NOTEWORTHY: Jones Lang LaSalle, Digital River, Dynamic Materials, Allot Communications and Oxford Industries were today's noteworthy downgrades:
Wachovia downgraded shares of Jones Lang LaSalle (NYSE: JLL) to Market Perform from Outperform, as they expect the deterioration in the credit markets to lead to fewer closed deals over the next year.
Oppenheimer transitioned coverage of Digital River (NASDAQ: DRIV) and downgraded shares to Neutral from Buy. The broker finds shares fairly valued given the pricing pressure and customer concentration.
Jefferies downgraded shares of Dynamic Materials Corporation (NASDAQ: BOOM) to Hold from Buy on valuation as they believe shares are already pricing in the company's near-term earnings potential.
Allot Communications (NASDAQ: ALLT) was downgraded to Sector Performer from Outperformer at CIBC World Markets after the company pre-announced weaker-than-expected Q3 results.
Oxford Industries (NYSE: OXM) was downgraded to Hold from Buy at Morgan Joseph and to Neutral from Buy at SunTrust following the disappointing Q1 report and guidance.
OTHER DOWNGRADES:
Piper Jaffray downgraded Target Corporation (NYSE: TGT) to Market Perform from Outperform.
Thornburg Mortgage (NYSE: TMA) was downgraded to Underperform from Market Perform at Keefe Bruyette.
Continental Airlines, Inc. (NYSE: CAL) shares are trading higher today as oil futures are sinking today, dropping below $80 per barrel and giving most airline stocks a boost on the expectation of lower fuel costs. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
After hitting a one-year high of $52.40 in January, the stock dipped to a one-year low of $26.21 in August. CAL opened this morning at $35.30. So far today the stock has hit a low of $35.25 and a high of $36.98. As of 10:50, CAL is trading at $36.30, up $0.85 (2.4%). The chart for CAL looks neutral and deteriorating, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a December bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just 11 weeks as long as CAL is above $25 at December expiration. Continental would have to fall by more than 15% before we would start to lose money. Learn more about this type of trade here.
Continental Airlines, Inc. (NYSE: CAL) opened at $26.95. So far today the stock has hit a low of $26.55 and a high of $28.06. As of 10:55, CAL is trading at $27.90, up $1.45 (5.5%).
After hitting a one year high of $52.40 in January, the stock has been sliding over the past eight months. Rising crude oil futures brought airlines down hard in yesterday's market, with CAL dropping a whopping 17%. Today the stock is climbing back with crude oil prices retreating in early trading, but it has a lot of ground to make up after yesterday's plunge. An analyst also said today that he expects CAL to rebound above $35. Technical indicators for CAL are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $22.50 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make an 11.1% return in just 5 weeks as long as CAL is above $22.50 at September expiration. CAL would have to fall by more than 18% before we would start to lose money.
CAL hasn't been below $22.50 at all in the past year and has shown support around $26.50 recently. This trade could be risky if oil prices rise again to crazy levels, but even if that happens, CAL may find historical support just below $25.
Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAL.
Continental Airlines, Inc. (NYSE: CAL) opened at $32.85. So far today the stock has hit a low of $32.26 and a high of $33.21. As of 10:50, CAL is trading at $32.38, up $0.70 (2.2%).
After hitting a one year high of $52.40 in January, the stock has slid downward over the past eight months. CAL is leading all the airlines up today after reporting July traffic rose by 3.6%. Technical indicators for CAL are bearish and steady, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a September bull-put credit spread below the $25 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk and leverage returns. For this particular trade, we will make an 8.7% return in just seven weeks as long as CAL is above $25 at September expiration. CAL would have to fall by more than 22% before we would start to lose money.
CAL has hasn't been below $25 since last August and has shown support around $31.50 recently. This trade could be risky if fuel prices continue to rise, but with crude oil at all-time highs, there should be some decrease in demand and price on the horizon. Brent Archer is an options analyst and writer at Investors Observer. DISCLOSURE: At publication time, Brent neither owns nor controls positions in CAL.
AMR Corporation (NYSE: AMR) opened at $27.50. So far today the stock has hit a low of $27.40 and a high of $28.45. As of 10:30, AMR is trading at 28.20, up 1.14 (4.2%).
After hitting a one year high of $41.00 in February, the stock has crept downward to flatten out just above 25 over the past few months. Continental (NYSE: CAL) is leading airlines up this morning following an upgrade from Soleil Securities. The industry is also being helped by falling oil futures. Recent technical indicators for AMR have been neutral and improving, while S&P gives the stock a neutral 3 STARS (out of 5) hold rating.
For a bullish hedged play on this stock, I would consider a July bull-put credit spread below the $25 range. AMR hasn't been below $25 since October and has shown support around $26 recently. This trade could be risky if crude oil prices spike even higher over the next few weeks, but even if that happens, it looks like this stock could find support right near $25, where the stock has bounced three times since April.
DISCLOSURE: Mr. Archer owns and/or controls diversified portfolios of long and short stock and option positions that may include holdings in companies he writes about. At publication time, Brent neither owns nor controls positions in AMR or CAL.
Socially conscious investors may want to grab a copy of this week's (April 2, 2007) edition of FORTUNE magazine, which is all about the greening of corporate America. No longer can companies merely not pollute: The double bottom line of both economic profitability and social responsibility demands that companies re-engineer themselves and their products to be as environmentally friendly as possible.
Companies that are ahead of the game will prosper. Companies that lag behind in environmentalism will be punished by investors as well as the media. The article "Green is Good" summarizes the green activities of 10 well known companies that stand to reap rewards for their environmentally sensitive manufacturing and operational practices. Companies taking the lead towards a low-carbon economy are:
Continental Airlines (NYSE: CAL - option chain) shares are soaring higher today after the company announced that it expects more than $100 million a year in fees and savings by charging travelers to check luggage. Obviously, checked luggage fees irritate travelers, but it is good for the company, then it should be good for the stock, and if you make a little money on the stock then you can afford to pay the extra fees and maybe even a mini-bottle of whiskey too. CAL is also getting a lift today from the drastic slide in oil prices, which have almost dropped below $100. If you think that the stock won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on CAL.
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Before the bell: Wall Street headed higher; automakers, retailers in focus
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