President Trump's declaration that the ceasefire with Iran is over has prompted traders to anticipate increased volatility in crude oil prices and a potential downturn in airline stocks. Despite this, airline stocks have performed well since the onset of the U.S.-Iran conflict on February 28, with the U.S. Global Jets ETF rising 10% during this period.
However, it fell 4% on Wednesday, extending a two-day decline after reaching all-time highs last week. Crude oil prices initially surged by 78% before stabilizing, indicating a complex market reaction. Options trading data reveals a significant shift, with put-buying making up nearly 75% of all options trading in the JETS ETF, suggesting bearish sentiment among traders. Conversely, in the U.S.
Oil ETF (USO), there was a notable preference for call options, indicating optimism about future oil prices. Phil Streible, chief strategist at Blue Line Futures, noted that this situation could lead to a short squeeze, as many traders were caught off guard. Investors are particularly focused on Delta Airlines, which is set to report earnings soon, with its stock up 25% year-to-date.
Options traders are anticipating a 6% price swing in Delta shares post-earnings, reflecting heightened uncertainty. Interestingly, despite the bearish sentiment, a significant trade involved a call buyer investing nearly $800,000 in options that would require an 11% rally to be profitable, highlighting the mixed signals in the market