Institutional Traders See Delta Air Lines Taking Off: A Look At The Trades

Morgan Stanley maintained its Overweight rating on Delta Air Lines, Inc DAL and lowered its price target to $67 on Tuesday. The price target was a gift to traders and investors with Delta currently trading about 70% below the $67 mark near the $40 level.

The travel sector has been alarmed by fears that the COVID-19 delta variant could once again put the U.S. and other countries into another lockdown.

Despite this, on Wednesday morning an institution placed a bullish block trade of Delta shares.

At 10:45 a.m. the trader purchased 510,000 shares of Delta Air above the ask at $39.20. The cost of the order totaled over $19.9 million.

After the block trade was completed, institutions began to hammer bullish Delta calls. Together the traders purchased $259,597 worth of contracts with most traders choosing a strike price of $40 or $41 with an early October expiry.

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

• At 11:17 a.m., a trader executed a call sweep at the ask of 261 Delta Air options with a strike price of $40 expiring on Oct. 15. The trade represented a $38,628 bullish bet for which the trader paid $1.48 per option contract.
• At 11:56 a.m., a trader executed a call sweep at the ask of 259 Delta Air options with a strike price of $40 expiring on Oct. 15. The trade represented a $37,037 bullish bet for which the trader paid $1.43 per option contract.
• At 11:57 a.m., a trader executed a call sweep at the ask of 200 Delta Air options with a strike price of $40 expiring on March 18, 2022. The trade represented a $77,000 bullish bet for which the trader paid $3.85 per option contract.
• At 12:44 p.m., a trader executed a call sweep at the ask of 435 Delta Air options with a strike price of $41 expiring on Oct. 8. The trade represented a $36,540 bullish bet for which the trader paid 84 cents per option contract.
• At 12:44 p.m., a trader executed a call sweep at the ask of 435 Delta Air options with a strike price of $41 expiring on Oct. 8. The trade represented a $36,540 bullish bet for which the trader paid 84 cents per option contract.
• At 12:45 p.m., a trader executed a call sweep at the ask of 403 Delta Air options with a strike price of $41 expiring on Oct. 8. The trade represented a $33,852 bullish bet for which the trader paid 84 cents per option contract.

DAL Price Action: Shares of Delta Air Lines were trading up 0.51% at $39.67 a share Wednesday afternoon.

Photo: Courtesy Delta Air Lines