American Airlines Stock Takes Off, Options Traders See It Grounded Soon

American Airlines AAL rebounded over 6% Tuesday after the stock gapped down on Monday amid concerns over the rapid spread of the COVID-19 Delta variant and how it may impact travel.

American Airlines is set to print its second-quarter earnings Thursday and the company sees revenues down 37.5% but its cost per available seat up 11% to 12% compared to the same quarter in 2019. When American airlines reported its first-quarter earnings on April 22, revenues came in at $4 billion, which represented a decrease of 52.93% year over year. The company reported earnings per share of $(4.32), down 63% compared to the previous year.

What's Happened? Things have been looking up for the airliner as global vaccination rates increase and countries begin to reopen borders. Last week American Airlines announced it had asked about 3,300 flight attendants to plan to return to work for the holiday season in order to meet demand.

The stock has struggled to take flight, however, and has been trading in a steep downtrend since slamming into resistance at the $26 level. When American Airlines bounced Monday, options traders took advantage of higher prices to position themselves into bearish put contracts. Although there were a few call contracts purchased, options traders bet over $1.24 million American Airlines stock will sell off in the weeks and months following its earnings print.

See Also: Airline Stocks Sell Off: Recent Moves By American, Delta, JetBlue To Watch

Why It’s Important: When a sweep order occurs, it indicates the trader wanted to get into a position quickly and is anticipating an imminent large move in stock price. A sweeper pays market price for the call or put option instead of placing a bid, which sweeps the order book of multiple exchanges to fill the order immediately.

These types of option orders are usually made by institutions, and retail investors can find watching for sweepers useful because it indicates “smart money” has entered into a position.

The American Airlines Trades: Below is a look at the notable options alerts, courtesy of Benzinga Pro:

• At 9:42 a.m., a trader executed a put sweep at the ask of 871 American Airlines options with a strike price of $20 expiring on July 23. The trade represented a $105,391 bearish bet for which the trader paid $1.21 per option contract.
• At 9:58 a.m., a trader executed a put sweep at the ask of 288 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $86,400 bearish bet for which the trader paid $3 per option contract.
• At 9:59 a.m., a trader executed a put sweep at the ask of 323 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $96,254 bearish bet for which the trader paid $2.98 per option contract.
• At 10:01 a.m., a trader executed a put sweep at the ask of 443 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $131,128 bearish bet for which the trader paid $2.96 per option contract.
• At 10:06 a.m., a trader executed a put sweep at the ask of 246 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $71,586 bearish bet for which the trader paid $2.91 per option contract.
• At 10:22 a.m., a trader executed a put sweep at the ask of 357 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $103,887 bearish bet for which the trader paid $2.74 per option contract.
• At 10:22 a.m., a trader executed a put sweep at the ask of 452 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $123,848 bearish bet for which the trader paid $2.74 per option contract.
• At 10:23 a.m., a trader executed a put sweep at the ask of 339 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $92,208 bearish bet for which the trader paid $2.72 per option contract.
• At 10:27 a.m., a trader executed a put sweep at the ask of 230 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $62,100 bearish bet for which the trader paid $2.70 per option contract.
• At 10:31 a.m., a trader executed a put sweep at the ask of 213 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $57,510 bearish bet for which the trader paid $2.70 per option contract.
• At 10:33 a.m., a trader executed a put sweep at the ask of 212 American Airlines options with a strike price of $22 expiring on Aug. 20. The trade represented a $57,240 bearish bet for which the trader paid $2.70 per option contract.
• At 10:36 a.m., a trader executed a put sweep at the ask of 979 American Airlines options with a strike price of $19 expiring on July 23. The trade represented a $33,286 bearish bet for which the trader paid 34 cents per option contract.
• At 11:07 a.m., a trader executed a put sweep at the ask of 353 American Airlines options with a strike price of $17 expiring on Dec. 17. The trade represented a $42,713 bearish bet for which the trader paid $1.21 per option contract.
• At 12:12 p.m., a trader executed a put sweep at the ask of 486 American Airlines options with a strike price of $17 expiring on Sept. 17. The trade represented a $26,244 bearish bet for which the trader paid 54 cents per option contract.
• At 12:12 p.m., a trader executed a put sweep at the ask of 474 American Airlines options with a strike price of $17 expiring on Sept. 17. The trade represented a $25,596 bearish bet for which the trader paid 54 cents per option contract.
• At 12:13 p.m., a trader executed a put sweep at the ask of 514 American Airlines options with a strike price of $17 expiring on Sept. 17. The trade represented a $27,756 bearish bet for which the trader paid 54 cents per option contract.
• At 1:03 p.m., a trader executed a put sweep at the ask of 560 American Airlines options with a strike price of $19 expiring on Aug. 20. The trade represented a $38,080 bearish bet for which the trader paid 68 cents per option contract.
• At 1:03 p.m., a trader executed a put sweep at the ask of 431 American Airlines options with a strike price of $19 expiring on Aug. 20. The trade represented a $29,308 bearish bet for which the trader paid 68 cents per option contract.
• At 1:03 p.m., a trader executed a put sweep at the ask of 462 American Airlines options with a strike price of $19 expiring on Aug. 20. The trade represented a $31,416 bearish bet for which the trader paid 68 cents per option contract.