CHICAGO - The drop in crude oil prices on Thursday may have spurred some investors to scoop up bullish call options in AMR Corp's American Airlines in hopes of catching extended share price gains in the next few months.
In afternoon trade, about 16,000 calls and 1,644 puts traded in American Airlines, exceeding the combined daily volume of 13,000 contracts, data from option analytics firm Trade Alert show.
AMR shares jumped 8.8 percent to $9.21 on the New York Stock Exchange, more than double its 52-week low of $4 in July.
"In looking for the reason for the call activity, perhaps the weak energy environment allows airline companies to retool themselves by locking into lower fuel costs over the next few years," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.
U.S. crude oil futures extended losses to more than $3 a barrel on Thursday, to nearly a four-year low, amid demand worries in a recession and as bearish natural gas storage data also pressured the energy complex.
On the New York Mercantile Exchange at 1:14 p.m. EST (1814 GMT), January crude CLF9 was down $2.75, or 5.88 percent, at $44.04 a barrel, trading from $43.77 -- the lowest since $42.80 was struck on Jan. 6, 2005 -- to $47.27.
In the options market, call buyers emerged trying to lock into American's rising share price, analysts said.
The most active options were the January $10 and the February $9 call strikes, conveying the right to buy American shares at $10 and $9 a piece, respectively, over the next quarter.
"This morning we saw heavy buying on the January $10 and February $9 calls as option traders were betting that American Airline shares could go higher," said Andrew Coffey, an analyst at Web information site optionmonster.com in Chicago.
Buyers earlier paid a premium of $1.11 for the January $10 contract, implying a break even share price of $11.11 at expiration next month and the February $9 calls fetched $2.15, indicating a break even of $11.15 by February expiration.
In the February $9 call strike, investors held practically no open positions, before the buying frenzy of more than 5,000 contracts occurred in that strike, Wilkinson said.
But Wilkinson noted as the share price rises, the associated volatility in American options may continue to decline, which could pressure the value of those calls, especially as time erodes.
"So there are additional risks for these trades' performance," he said.
In afternoon trade, about 16,000 calls and 1,644 puts traded in American Airlines, exceeding the combined daily volume of 13,000 contracts, data from option analytics firm Trade Alert show.
AMR shares jumped 8.8 percent to $9.21 on the New York Stock Exchange, more than double its 52-week low of $4 in July.
"In looking for the reason for the call activity, perhaps the weak energy environment allows airline companies to retool themselves by locking into lower fuel costs over the next few years," said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.
U.S. crude oil futures extended losses to more than $3 a barrel on Thursday, to nearly a four-year low, amid demand worries in a recession and as bearish natural gas storage data also pressured the energy complex.
On the New York Mercantile Exchange at 1:14 p.m. EST (1814 GMT), January crude CLF9 was down $2.75, or 5.88 percent, at $44.04 a barrel, trading from $43.77 -- the lowest since $42.80 was struck on Jan. 6, 2005 -- to $47.27.
In the options market, call buyers emerged trying to lock into American's rising share price, analysts said.
The most active options were the January $10 and the February $9 call strikes, conveying the right to buy American shares at $10 and $9 a piece, respectively, over the next quarter.
"This morning we saw heavy buying on the January $10 and February $9 calls as option traders were betting that American Airline shares could go higher," said Andrew Coffey, an analyst at Web information site optionmonster.com in Chicago.
Buyers earlier paid a premium of $1.11 for the January $10 contract, implying a break even share price of $11.11 at expiration next month and the February $9 calls fetched $2.15, indicating a break even of $11.15 by February expiration.
In the February $9 call strike, investors held practically no open positions, before the buying frenzy of more than 5,000 contracts occurred in that strike, Wilkinson said.
But Wilkinson noted as the share price rises, the associated volatility in American options may continue to decline, which could pressure the value of those calls, especially as time erodes.
"So there are additional risks for these trades' performance," he said.
