Options Mastery: Unraveling the Spirit Airlines ($SAVE) Trade Saga with TradingFlow Insights
This is the TradingFlow Team, and this article will focus on options or equities, guiding you through the rationale behind compelling trades and demonstrating how to effectively utilize TradingFlow tools.
In this edition, we will delve into the options flow of Spirit Airlines, Inc. ($SAVE).
On January 12th, with the $SAVE stock priced at $14.95 per share, we observed an influx of unusual options flow for the at-the-money $15P 01/26/2024 contract. The implied volatility for the contract stood at approximately 276%, indicating a substantial expected move. Concurrently, JetBlue Airways ($JBLU) was in talks to acquire Spirit Airlines.
The volume for the strike increased notably around 12:50 pm CST, with an initial entry of 2,320 contracts at an average price of $3.20 per contract. Additional orders came in later that afternoon, totaling just under 3,000 contracts for the day. On Tuesday, 1/16, further orders ranging from $2.85 to $3.00 were executed, totaling over 2,000 contracts. The developments following Tuesday morning's flow were particularly noteworthy.
Around noon CST on Tuesday, 1/16, it was reported that a judge had blocked the $3.8 billion merger between JetBlue and Spirit Airlines, citing antitrust law violations. The judge argued that the merger would stifle competition and lead to increased airfares. Despite the companies' disagreement with the ruling, the $SAVE stock price plummeted by 50%, from $15.24 to $6.59 per share.
The resulting trade outcome is displayed above. The instant news broke about the blocked merger, the contract value surged from $2.85 per contract to an impressive $9.82 per contract. Considering the initial entry at $3.20 per contract, the average cost per contract was approximately $3.03, translating to a remarkable overnight gain of 225%.
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Disclaimer: This article is for informational purposes only and does not constitute investment advice. Before making any financial investment decisions, please ensure you thoroughly understand all aspects of the information and conduct your own research.