Play the Summer Travel Demand with My #1 Airline Trade

My Top Airline Play

Airlines were arguably one of the hardest-hit sectors by the pandemic.

But like everything else, it’s rising back up – security lines are growing longer, flight schedules are getting busier, and travel demand is returning strong.

That’s why I’ve been expecting airline stocks to get some sort of momentum on the rebound.

But this sector hasn’t seen much movement since February of this year.

Just take a look at the US Global Jets ETF (NYSEARCA:JETS), whose top holdings include some of the most well-known airlines in the U.S., like Delta Airlines Inc. (NYSE:DAL), United Airlines Holdings Inc. (Nasdaq:UAL), Southwest Airlines Co. (NYSE:LUV), and American Airlines Group Inc. (Nasdaq:AAL):

JETS YTD, taken from stockcharts.com
Airlines got a solid jump earlier this year, popping 34.2% from the end of January to mid-March. But over the past month, we’ve watched as the sector has taken a fast descent, falling about 15%.

Despite what the chart says, air travel demand is rising. After laying off thousands last year, airlines are struggling with long lines and canceled flights. AAL had to cancel flights to keep up – remember?

And now, AAL, DAL, and UAL have all announced plans to hire more workers as summer has brought more and more travelers to the airport.

It’s only a matter of time until the stocks react and climb back towards their pre-pandemic highs.

An airline trade actually popped up on my big-money flow radar today.

As you can see, this trader is betting on momentum pouring into DAL:

DAL announced earnings yesterday, reporting their first profit since 2019.

Now, this is mainly due to federal aid, but according to this big money trader, it’s a report that’s going to catapult DAL higher.

They bought the January 2022 $45 calls for $2.58 while simultaneously selling the $52.50 call, creating a call spread trade for $1.54 – a bet that could make them $5.96 if they’re right.

Now, don’t get me wrong – this is a great trade. But DAL isn’t my airline of choice. Like I said on Monday, LUV is.
So, instead of piggybacking this DAL impact money trade, I’ve been buying LUV September 17, 2021 $52.50 calls for about $2.50. They’ve got a nice chance of popping higher if airlines start to see some momentum before the summer’s up.

Mark’s Watchlist

I’ve got a mix of bullish and bearish names here. Want to see which is which – and even get a few trade ideas?

1. Walgreens Boots Alliance Inc. (Nasdaq:WBA)

WBA was once my number one pick of the year. I made some good money on the drugstore name back in January – but since then, it’s just been disappointing. While CVS turned the pandemic into an opportunity, WBA didn’t. And it got pounded, down 18% over the past three months.

Once WBA starts moving a little bit more, I’ll consider selling puts. The January 2022 $45 puts would hand out a nice $3.33 in premium to get into the stock under $45 – and that’s why it’s on my watchlist today.

2. Virgin Galactic Holdings Inc. (NYSE:SPCE)

I’ve been pressing the short button on this junk company for months, and I’m going to keep doing it. It’s down 42% in less than a month’s time, and I see it falling to $25 or lower from here.

3. Peabody Energy Corp. (NYSE:BTU)

Coal prices are hitting their highest prices in decades right now, and I’d be lying if I said I wasn’t surprised. But I’m putting my shock aside and focusing on the money – because coal mining company BTU just jumped 14% in a single day, signifying a potential profit opportunity as coal prices continue on the uptrend.

4. Millendo Therapeutics Inc. (Nasdaq:TPST)

Everyone’s been talking about TPST, and I’m finally giving it the attention it deserves. Earlier in the month, this name jumped over 130% in four days. And while it may be too late to catch the updrift, this meme stock could start dying off soon – and I’m looking to get it on the downside.

5. Nokia Oyj (NYSE:NOK)

NOK is actually one of my favorite plays of the year. With products from China’s Xinjiang, I think NOK could step in and pick up a lot of business. Right now, shares sit around $5.70. I think $7.50 will be the trigger point here – if it gets to that, then there’s no telling how far this stock could go.

6. Apple Inc. (Nasdaq:AAPL)

I’ve been bullish on AAPL for quite some time now. And I’ve been right – the tech favorite has soared 14% over the past month. But it can only go so far – and now, I’m changing my tune. AAPL is overbought, and I’m looking to short it to profit on the downside as it comes back to earth.

7. Ribbon Communications Inc. (Nasdaq:RBBN)

Unlike AAPL, RBBN is a small-cap company – one that’s on my radar with a great inexpensive play. The January 2022 $7.50 calls are only about $1.50 – and that’s a cheap way to profit as this low-dollar stock makes its way higher.

VIX Traffic Light

We’ve now officially closed out our UVXY put for a 38% gain – and our second profit on the leveraged ETF!

Now, the VIX light is still red. So you may be wondering… why did we exit?

Listen – leveraged ETFs like UVXY are great trading vehicles. They’re ideal for short-term profits like the ones we’ve taken so far.

But they’re very dangerous as long-term holds. Throughout the day, they’ll move with their underlying instrument, like UVXY does with the VIX. But over time, they’re controlled by the term structure of their futures.

So, I never want to hold onto one of these names for too long. That’s why yesterday we took our money and ran…

Right into a new trade – a post-earnings play on JPMorgan Chase & Co. (NYSE:JPM). Today, this trade is already up over 20%. You can track its progress – and the rest of our Profit Takeover portfolio – right here.

Speaking of the portfolio – stay tuned. I’ve gotten a ton of Ask Me Anything questions regarding our positions. And tomorrow, I’m going to do a full portfolio review.

Keep an eye on your inbox.

Today’s Impact Money Trade

I already told you about one big-money trade today. But as you know, I’m not interested in piggybacking the aforementioned DAL call spread.

This straddle on CBS Corp. Common Stock (Nasdaq:VIAC), however, has piqued my interest:

The buyer of this big-money straddle thinks VIAC is going higher – that’s what the $40 call is for. But they’re hedging their bet with the $40 put.

Now, there’s a way to follow this trade without buying the straddle. And it’s got a much cheaper price tag than the $5.10 play we’re looking at here.

The August 20, 2021 $45 calls have the same bullish outlook within the same time period, but with an OTM strike price, they cost a lot less – just $1.30 for a bullish bet on this mass media company.

That’s it for today, folks – but tomorrow, I’m doing a complete portfolio review. So be sure to send all your questions about our open and closed positions right here – I’ll do my best to answer them all.

Until tomorrow,

Mark Sebastian

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