Scott Bauer's Delta Air Lines Trade Ahead Of Earnings

Scott Bauer of Trading Advantage spoke on Bloomberg Markets about his options trading idea in Delta Air Lines, Inc. DAL ahead of earnings.

The company is going to report earnings on Thursday and over the last two years it has missed expectations only twice. Bauer thinks that Delta Airlines could raise guidance, which would move the stock higher. He added that short interest in the name is almost 3 percent and it has risen 30 percent since the last earnings.

If the company reports good guidance, there is going to be some short covering. Bauer wants to use options to make money in Delta Airlines. Specifically, he wants to buy the January 51/53 call spread for $0.70. The trade breaks even at $51.70 or 0.51 percent above the current market price and it can maximally make a profit of $1.30, if the stock jumps 3 percent or more.