27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.
About one month ago, Benzinga spoke with Frank Holmes, CEO and Chief Investment Officer of U.S. Global Investors, about the brand new U.S. Global Jets ETF (NYSE: JETS), the only pure-play airline ETF. Over the past month, airline stocks and the new ETF have significantly lagged the S&P 500. Benzinga recently has a chance to follow-up with Mr. Holmes and discuss what’s been going on in the airline industry, if there is cause for concern and what airline investors should be watching closely throughout the remainder of 2015.
Airline tailspin
The S&P 500 is slightly up in the last month of trading, but stocks of all of the “Big 4” airlines (Delta Air Lines Inc (NYSE: DAL), United Continental Holdings Inc (NYSE: UAL), American Airlines Group (NASDAQ: AAL) and Southwest Airlines Co (NYSE: LUV)) are down big in that span.
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When Benzinga asked Frank Holmes why airline stocks have been struggling, he pointed the finger at recent airline capacity increases. “There’s this thought process out there that airlines are going to dilute their cash flow, but I don’t think so,” Holmes explained.
Holmes also indicated that he has seen no change in the past month that has altered his bullish, valuation-based long-term fundamental thesis for airline stocks.
Oil ‘sweet spot’
When Benzinga asked Holmes about Goldman Sachs’ forecast of $50 oil in 2020 and the impact that low oil prices could have on airline stocks, he explained that cheap oil is great for airlines’ cash flows as long as it does not threaten the overall economy. “It’s more beneficial to the overall economy if oil is around $65, and in talking to the analysts at Cowan & Co, it seems as though $65-$70 oil is a sweet spot for the economy and the airlines,” he said.
What to watch
Overall, Holmes isn’t concerned with airline capacity increases because of the ever-increasing demand for air travel generated by a booming economy. However, he does see risk to ticket prices and margins if the U.S. economic expansion were to stall, and he believes that airline investors should be closely monitoring the health of the overall U.S. economy.
At this point, Holmes sees no cause for concern in the near-term. “Trust me, I’m flying from Vancouver today, and there’s no discount on ticket prices,” he joked.
27% profit every 20 days?
This is what Nic Chahine averages with his option buys. Not selling covered calls or spreads… BUYING options. Most traders don’t even have a winning percentage of 27% buying options. He has an 83% win rate. Here’s how he does it.