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Morning Update


This morning US stock futures are pointing towards a higher open after better than expected jobless claims and import/export data. Europe sold off early in the overnight session on news that S&P downgraded Spanish debt to BBB-. However, since then markets have retraced a good portion of that move down and the Euro is now in positive territory.

Yesterday the options order flow in Boeing caught our eye as call buyers pushed the put/call ratio on the ISE down to 0.0625. Across all exchanges Boeing’s put/call ratio was 0.43. The biggest trade of the day was the purchase of 4,500 May 77.5 calls for $2.05. These options are 10% out of the money as of yesterday’s close and expire in 218 days. There are a few different reasons traders are getting bullish on Boeing. One is that yesterday Alaska Air announced that they will be buying 50 aircraft from Boeing to be delivered between 2015 and 2022. This is the largest order in Alaska airline’s history and the contract is worth $5B in revenue to Boeing. Also, yesterday Citigroup said that it expects Boeing’s December board meeting to result in a 20% dividend hike and a $2B share repurchase program. Citigroup reaffirmed their buy rating on the stock with a price target of $89. Finally the most recent edition of Barron’s said that Boeing is one of the companies that would benefit most from a Romney victory, which could be increasing bullish sentiment on the stock as Obama’s lead in the polls narrows. Boeing shares have underperformed the Dow and S&P so far this year, but the winds may be changing for the stock. The 77.5 strike corresponds with the stock’s 52-week high, so buying these calls is a way to profit from an upside market breakout with only $2.05 of risk should the market stagnate or decline.

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