Boeing Stock Bottoms? How Options Traders can Capitalize
Boeing Stock Bottoms? How Options Traders can Capitalize
Boeing had a terrible start to 2024, with the stock down as troubles mount
- Boeing stock is under pressure as regulator, legal troubles mount.
- No reaction to the most recent negative headline may show selling is done for now.
- High implied volatility rank (IVR) puts options sellers in the driver’s seat.
Boeing (BA) has had a terrible start to 2024, with the stock down in each month of trading so far, as troubles around the airplane maker continue to plague the company’s once-stellar reputation.
As of March 15, BA is down nearly 10% on a monthly basis, which follows a 19.04% and 3.47% drop in January and February, respectively.
Troubles mount for the aerospace company
The hits keep coming for Boeing, with the company knee-deep in regulatory troubles. While troubles were already present before this year, in January, a panel on a 737 Max 9 aircraft operated by Alaska Airlines—part of Alaska Air Group (ALK)—suffered a catastrophic blowout following its takeoff from Portland, Oregon.
The fallout was immediate, not only for Boeing’s already-ailing reputation but also for its stock price. In the following days, the Federal Aviation Administration (FAA) ordered inspections of 737 Max jets—a time-consuming process for airlines that use that kind of aircraft, resulting in considerable operational disruptions.
On Jan. 24, the FAA allowed airlines to continue Max 9 operations but ordered a halt to expansion operations to produce 737 Max aircraft as they inspect the production and safety protocols around production. And if that wasn’t enough, the Department of Justice launched a criminal probe into the blowout incident, reported on Saturday by the Wall Street Journal.
Adding to the mystery, Boeing said it could not find work records or recordings for the work done on the Alaska Airlines plane. And to make things more bizarre, a whistleblower recently died by alleged suicide, which caused a swirl of speculation on social media, with many alleging that Boeing silently assassinated the informant.
Trading Boeing amid the chaos
Boeing stock rose about 1.3% on Friday despite selling across the broader equity space. The stock price also held up against an announcement by Fitch that its rating outlook was downgraded to stable from positive. The fact that BA didn’t drop on such a negative headline shows the possibility that the selling in BA may be over for now.
That said, getting long BA might interest some who are looking to take advantage of the heightened volatility that is present in the stock price. The implied volatility rank (IVR) currently stands at 54.3. Selling a put spread at the 30 delta (short 175 p/long 170 p) for the April 19 expiration offers a risk/reward of +116 and -384, with a probability of profit (POP) at 70%.
Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater
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