Huge Boeing Option Trader Makes $3M Bet On Nearly 50% Upside By September

Boeing Co BA shares traded lower by another 11.8% on Wednesday as the stock market experienced yet another volatile trading session.

A pair of large Boeing option trades were mixed in nature, with one deep-pocketed Boeing bull making a massive bet on a sharp recovery for the stock.

The Trades

On Wednesday, Benzinga Pro subscribers received two option alerts related to unusually large trades of Boeing options:

• At 9:30 a.m., a trader bought 1,465 Boeing call options with a $170 strike price expiring on Sept. 18 near the ask price at $21. The trade represented a bullish bet worth $3.07 million.
• At 1:01 p.m., a trader bought 509 Boeing put options with a $100 strike price expiring on April 17 near the ask price at $4.651. The trade represented a $236,735 bearish bet.

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Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Boeing trade, it could potentially represent an institutional hedge.

Boeing At Risk?

Boeing shares have plummeted 59.6% year-to-date on fears the government will need to bail out or potentially even nationalize the ailing company. According to Treasury Secretary Steven Mnuchin, as of last Friday Boeing had not requested financial help from the government.

“Boeing has said that they have no intention of using a program that may change in the future,” Mnuchin said. “These are things that the companies need to come and ask us for. ... Right now Boeing’s saying they don’t need it.”

Back on March 20, Boeing announced it was suspending its dividend and share buybacks in an effort to weather the COVID-19 downturn.

Several Wall Street analysts have since stepped up with bullish commentary on the beaten-down stock. On Monday, Argus upgraded Boeing from Hold to Buy and set a $220 price target for the stock. The firm said Boeing plans to resume production of the grounded 737 MAX by May, and he anticipates it will be cleared to fly sometime this summer.

Credit Suisse and Baird also recently reiterated Neutral ratings on Boeing stock.

Bullish sentiment among StockTwits messages mentioning Boeing was at 64.6% on Wednesday, down from its 2020 high of 75.8% on Feb. 12.

Benzinga’s Take

The $3.07 million call purchase is the headline of the morning due to both its size and how far out of the money it is. The break-even price for those calls is $191, suggesting 46.1% upside for Boeing shares over the next five-plus months.

Do you agree with this take? Email feedback@benzinga.com with your thoughts.

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