AMR tanking 30% today

[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**