Medium term
Trade view / 20 August 2015 at 13:35 GMT

#SaxoStrats: Southwest Airlines could test towards January high

Global Macro Strategist / Saxo Bank Group - Singapore Hub
Singapore
Instrument: LUV:xnys
Price target:
Market price:
r
 
Background

Oil hit new six-year lows overnight and a break of the $40/barrel level into the $30s/b is very feasible. Southwest Airlines (LUV) has closed above the 200-daily moving average and while it is still some way short of the previous high of $46.93 on January 29, the stock price has lagged the recent oil drop.

Go long ITM 40 strike Sep 18 Calls at $1.70, with a stock close of $40.45.

Management and risk description

Watch out for a US equities crash, a strong recovery in oil or if the option maturity is too short. See stop for risk management.

Parameters

Entry: $1.70 (c. 4.2%); Strike 40 (ref. 40.45).

Stop: premium.

Target: $43-46.

Time horizon: September 18, 2015.

Can Southwest Airlines benefit from that low oil price?
c Source: Bloomberg

Southwest Airlines flying higher?
r
 Source: SaxoTraderGO

— Edited by Martin O'Rourke

Non-independent investment research disclaimer applies. Read more
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