Alaska Air Options Show Potential Upside for Investors

Investors eye Alaska Air Group, Inc. as new options unleash potential profit avenues. The new contracts indicate opportunities for both put and call strategies, hinting at favorable market sentiments.

Date: 05-02-2025

AI Rating: 6

Options Strategy Overview
Alaska Air Group, Inc. has introduced new options for investors with a May 16 expiration date, creating potential for various investment strategies. The analysis of these options demonstrates interesting possibilities for both put and call contracts, reflecting diverse viewpoints of market participants.

Puts Analysis
The put contract at a $72.50 strike price is priced at a bid of $2.45, enabling investors to potentially purchase shares at a reduced effective cost basis of $70.05 if they choose to sell this contract. This represents a roughly 3% discount to the current stock price of $74.72, establishing an attractive alternative for prospective buyers. The expected odds of this contract expiring worthless are calculated at about 62%, suggesting a good chance for this option to satisfy the premium return potential of 3.38%, or an annualized 12.34% yield. These factors may drive positive sentiment among conservative investors looking for lower-risk entry points.

Calls Analysis
On the other hand, the call contract at the $77.50 strike price showcases a bid of $3.10. When combined with the current share price, investors can anticipate a total return of 7.87% if the stock is called away, following the expiration of the contract. However, there is a risk of missing out on potential gains if the stock price rises significantly beyond this strike price. The probability of this call option expiring worthless is assessed at 51%, which indicates a balanced risk-reward scenario for those looking to generate income from their holdings.

The volatility of both put and call contracts is recorded at approximately 38%, while the historical trailing twelve-month volatility is slightly lower at 34%. This suggests that while the current options pricing reflects stability, there remains market variability that could impact future valuations.

Stocks: ALK