Wednesday, April 16, 2008

Invervention

I've got an addiction and I can't figure out how to stop. Every time I think I'd be better off going liquid and staying away from equities for a while, the market gives me an opportunity I can't pass up. Today's opportunity is something everyone is familiar with: Delta Airlines.

I'll be the first to say I'm not a fan of Delta. There are several of my friends and family that have been hung out to dry by this airline. Late flights, canceled flights, lost luggage, you name it. I've almost always flown American myself, but I'll be the first in line to take profit if the opportunity presents itself.

A few days ago, Delta announced a planned merger with Northwest airlines. This would make them the largest fleet in the air in the United States, even bigger than American. I know the outlook for all airlines has been bleak because of skyrocketing fuel prices. There's only one problem: People will always fly. At any given moment, there are anywhere from 2500 to 4000 planes in the air over the United States. That's a ton of traffic and a boatload of fuel being burned. People don't care as long as it gets them to their destination-fast.

Both NWA and Delta stock prices are lagging. Delta is down today as a matter of fact, even though the Dow is riding high with a 200+ point gain already. I checked my new favorite web site today:
http://www.schaeffersresearch.com/commentary/content/option+skews+-+yahoo+ebay+thornburg+mortgage+emc+corp+amazoncom+jds+uniphase+cree+mbia/trading_floor_blog.aspx?single=true&blogid=84034#84034
Check out the call skews for Delta (DAL)
The contracts being bought representing people that think DAL will be going up is at 27,036
The contracts being bought representing people that think DAL will go down is 248.

Wow. That's the same sort of discrepency that made me buy a put contract for Bear Stearns right before their fallout. I cashed in for a nice gain on that one because of the this call/put skew chart.

Long story short, I'm looking for Delta to go up nicely as the deal with NWA gets closer to being final, and when it does, I should be sitting pretty.

CZ

5 comments:

Anonymous said...

the toilet blog was way more entertaining. so should i fly delta in july? yeah, or neah? u better be glad i love you cause i tremble at the thought of both my children blowing out the bottoms of barf bags...maybe i should drive? then i could bring my glock and we could shoot? decisions, decisions....

Unknown said...

what's a glock?

Unknown said...

oh, and mandi, our friend scott calls chris' blog, "the investment years", since it seems more appropriate!!
haha! :-)

Anonymous said...

a glock is a 9mm gun sis-to-be!~

Craig said...

I had to chuckle when the soon wife-to-be of Chris Nash had to query "What's a glock?" Looks like Nash has some educating to do.

And Nash, you can write about investments all you want. I enjoy them, and you are following the No. 1 rule of writing -- write what you know about.