AMR tanking 30% today

[luckytohaveajob]

AMR is down 30% today

http://www.bloomberg.com/news/2011-10-03/amr-falls-to-lowest-since-2009.html

 

[lowtimedriver]

Does this mean that they won't be buying Alaska?:nuts:

 

[Stifler's Mom]

Look at the returns on the Oct PUT contracts. :nuts:

3.00 364% profit

-------------------

2.50 937% profit
2.00 900% profit
1.50 2400% profit

 

[redflyer65]

But they just had a huge aircraft order! And signs made up for the gate saying they will have the youngest fleet with this order.

Look out below!

 

[Beetle007]

Spirit Airlines is now worth more than American (848 million vs 663 million)

 

[C-150ETOPS]

Spirit Airlines is now worth more than American (848 million vs 663 million)

But our AA 737 Captains make $1/hour more than Spirit Captains :laugh:

 

[CitationLover]

Look at the returns on the Oct PUT contracts. :nuts:

3.00 364% profit

-------------------

2.50 937% profit
2.00 900% profit
1.50 2400% profit

Buying a put or call in a high volatile environment isn't the greatest investment choice to make. When that volatility falls and crushes your options, you won't like it.

Now selling one is a different story. But selling a put on AMR.......why would you want 100 more shares of AMR?

 

[CRAWDADDY]

4. Rumor
There is a rumor being disseminated that furloughs are immanent, that is not true.

Are you sure you mean immanent?

 

[CitationLover]

Are you sure you mean immanent?

Inside joke.

 

[CRAWDADDY]

Figured it had to be

 

[Dornier 335]

source

American declares stock price plunge will not force Chapter 11



By: Lori Ranson Washington DC


American Airlines has moved to quash speculation that a dramatic fall in its stock price on 3 October is a precursor to a Chapter 11 reorganisation.

American and its parent AMR have repeatedly prided themselves over the fact the carrier has never filed for Chapter 11, especially during the 2000-2010 timeframe when nearly every other US major declared bankruptcy.

The result is American has battled consistently higher labour costs than its peers and is currently in negotiations with a large number of employee groups to achieve more cost effective collective bargaining agreements.
Shares of American Airlines on the New York Stock Exchange closed at $1.98 on 3 October, roughly 33% below the 30 September close of $2.96. The precipitous decline triggered a freeze in trading of the company's shares. But American issued a statement explaining the pause in trading was due to automatic triggers established by the exchange that pause trading based on share price volatility.

American's chronic financial under-performance compared with its US legacy peers has bolstered speculation during the last few months that the carrier would enter bankruptcy protection, and the plummeting share price has intensified that sentiment.

However, American on 3 October specifically stated: "That is certainly not our goal or our preference. We know we need to improve our results, and we are keenly focused as we work to achieve that."

American is also facing higher than expected rates of pilot retirements this autumn, and has sought relief from the Allied Pilots Association on staffing stipulations in the current contract.

Wall Street has been scrutinising American's under-performance relative to its peers for quite some time. Weeks ago analysts at CRT highlighted American's unit revenue growth lagged behind the industry in every region during the second quarter, noting that American's domestic unit revenues grew by 4.9% compared with 8.9% for the industry.

While American's stock decline on 3 October was dramatic, the carrier's share price has been on an overall decline since it announced a record order with Airbus and Boeing on 20 July. From that time to mid-August its share price fell roughly 25%.

American while acknowledging its structural problems, has also asked for patience from the financial community as it institutes long-term strategic moves designed to reverse its fortunes including its "cornerstone" strategy to focus the majority of its flying in Dallas, Chicago, New York, Miami and Los Angeles as well as its new joint venture agreements with its Oneworld partners over the Atlantic and Pacific.

American has roughly $1.3 billion in debut maturities due in 2011, and recently the carrier launched a $726 million enhanced equipment trust certificate (EETC) to offset some of that debt.

 

[GuppyWN]

After reading that I suspect they'll file Monday.

Gup

 

[spacecadet1]

After reading that I suspect they'll file Monday.

Gup

Yup, and USAir takeover/prepackaged BK seems to be the likely guess.
Just connect the dots. There is a reason for the stock tanking.

 

[Stifler's Mom]

Buying a put or call in a high volatile environment isn't the greatest investment choice to make. When that volatility falls and crushes your options, you won't like it.

Now selling one is a different story. But selling a put on AMR.......why would you want 100 more shares of AMR?

Anybody that happened to own any of those puts before their big crash, rose that same wave of volatility to huge gains combined with the stock move. I'm sure people were selling back those options with those types of profits....or at least hopefully they did.

AMR's volatility took off on Oct 3 with all of the downward pressure of the stock crashing. It has since retreated a bit, is still pretty high. If it continues to fall, then selling would be a good idea, especially if you play it in the correct direction. One of the analysts rated AMR as a buy now, so that may encourage the price to rise some too.

Implied Volatility is an interesting thing. Have you ever watched a stock's options (both put and call, ie strangle or straddle) just before an earnings report, and after? I've seen the stock jump 5% overnight on earnings, but both the put and call lost value thanks to that same IV lowering you are talking about.

You definitely can't trade an option the same way you trade a stock.

 

[skidbuggy]

Yup, and USAir takeover/prepackaged BK seems to be the likely guess.
Just connect the dots. There is a reason for the stock tanking.

That would be a train wreck...

I can just see the motto now, "Two fvcked up airlines. One fvcked up future"

 

[CitationLover]

Anybody that happened to own any of those puts before their big crash, rose that same wave of volatility to huge gains combined with the stock move. I'm sure people were selling back those options with those types of profits....or at least hopefully they did.

AMR's volatility took off on Oct 3 with all of the downward pressure of the stock crashing. It has since retreated a bit, is still pretty high. If it continues to fall, then selling would be a good idea, especially if you play it in the correct direction. One of the analysts rated AMR as a buy now, so that may encourage the price to rise some too.

Implied Volatility is an interesting thing. Have you ever watched a stock's options (both put and call, ie strangle or straddle) just before an earnings report, and after? I've seen the stock jump 5% overnight on earnings, but both the put and call lost value thanks to that same IV lowering you are talking about.

You definitely can't trade an option the same way you trade a stock.

Just saying.

Buying a put for insurance is one of the dumbest ways of insurance. Especially an out of the money put which the $3 strikes and lower were until this week. What ends up happening is you buy the put when you need it and all that vega is built into the option.

Bankruptcy is a real risk. I'll have to look at the implied volatility in amr when I get home but I imagine it's high for the front end month (October).

Then again the 190/195 put spread I had on NFLX was looking really good for Sep exp until the wed before when it tanked from 200 to 150. Ugh got too greedy.

For an AWESOME explanation of options, etc. Check out tastytrade.com and watch some of the shows and clips. Tom is an absolute genius with the stuff.

As per amr the rumor I heard was they wanted to sign contracts then declare bankruptcy so they can start the whole negotiating process over.

 

[spacecadet1]

Heard AA to declare BK tomm. Unconfirmed.

 

[kommutrdog]

Why anyone is shorting/buying puts on a $2 stock is beyond me. Not much meat on that bone. That's like buying full comp/collision insurance on a $450 Yugo.

 

[SpaceShipEarth]

...wow. Worse financial analogy I have seen in a while

 

[CitationLover]

Why anyone is shorting/buying puts on a $2 stock is beyond me. Not much meat on that bone. That's like buying full comp/collision insurance on a $450 Yugo.

Not necessarily true with a liquid stock like AMR......

Take a simple covered call with Oct expiry on next friday.

For every 100 shares on AMR I buy at 2.45 (for $245)
I sell an at the money call (1 OCT 11 2.5) for 0.27 cents (I get $27 credited).

Now the stock I have for 2.45-0.27=2.18.

Say it closes next Friday above 2.50, I just made 0.32 cents on a 2.45 investment, 13.06%. I'd take that for two weeks and then turn around and sell the NOV 11 2.5 call if it closes below for another $0.40.

Point being with some capital involved you CAN make serious money with AMR.

 

[kommutrdog]

Covered calls are not the same as a put. My whole point is why pay .45 for a put with the MAX downside is 2 bucks or so? But yes, some CC action might work out ok but monkeying around with $2 stocks, at least on the short side, is a bit tedious.

Now, as for playing the short side on some idiocy plays like Priceline or Netflix, now you're talkin'. PCLN at $450/share? Gimme a break. WHEN that turd breaks, look out below!

Disclosure: Yes, I'm short PCLN.

 

[Snaab]

So what do the AA pilots think, is BK a possibility? I certainly hope not. I'm sure there are many training event that are created from having a 777 CA retire. Also, is the Company trying to meaningfully come to the table with APA and get a new contract?

Just curious. Hoping AA hires off-the-street pilots sometime in the near future. Good luck.

 

[CitationLover]

Covered calls are not the same as a put. My whole point is why pay .45 for a put with the MAX downside is 2 bucks or so? But yes, some CC action might work out ok but monkeying around with $2 stocks, at least on the short side, is a bit tedious.

Now, as for playing the short side on some idiocy plays like Priceline or Netflix, now you're talkin'. PCLN at $450/share? Gimme a break. WHEN that turd breaks, look out below!

Disclosure: Yes, I'm short PCLN.

Well I'm definitely of the camp that buying a put only is a dumb strategy no matter what but I see your point now.

Agree about PCLN as well. NFLX went from 300 to 115 in two months. The next asset bubble to break is bonds (TLT) IMO.

Returning to amr. The rumor I heard from an AA pilot was that they wanted to SIGN contracts now then declare bankruptcy so they could start the negotiating process all over again.

 

[aa73]

Will we file BK? Don't know, don't care. Not our job to save the company from themselves. Even Wall St is finally facing the fact that this has been one of the worst management teams ever to hit the airlines. Crandall would have NEVER let things get this bad. After the stock fiasco Monday, where was management to defend the company? Nowhere... unavailable... hiding.

Company has come to the union begging for relief. They want us to fly up to 88 hours with pickup to 100 in exchange for.... full trip protection (we currently have only a 64hr line guarantee so if trips fall apart... big pay hit.) Sorry, not gonna cut it! If they want relief, sign our industry leading contract that we have been negotiating for FIVE YEARS and the company has been dragging their feet. Now suddenly they "need relief badly?"

NO CONTRACT, NO RELIEF!

 

[ironspud]

Will we file BK? Don't know, don't care.

Bullsh**