Here's How Large Boeing Option Traders Are Reacting To Abysmal Monthly Orders

Boeing Co BA shares traded lower by 2.7% on Tuesday after the company reported another round of 737 Max cancellations and zero new orders in April.

A flurry of large Boeing option trades were mixed in nature, with one deep-pocketed Boeing bull selling a massive number of Boeing puts.

The Boeing Trades

On Tuesday, Benzinga Pro subscribers received 13 option alerts related to unusually large trades of Boeing Airlines options. Here are a handful of the biggest:

• At 11:39 a.m., a trader sold 600 Boeing put options with a $150 strike price expiring on Friday at the bid price of $21.18. The trade represented a $1.27 million bullish bet.
• Less than a minute later, a trader sold another 756 of the same Boeing put options with a $150 strike price expiring on Friday at the bid price of $21.18. The trade represented another $1.6 million bullish bet.
• At 11:40 a.m., a trader sold 756 Boeing put options with a $140 strike price expiring on June 19 at the bid price of $18.141. The trade represented a $1.37 million bullish bet.
• Less than a minute later, a trader sold another 600 of the same Boeing put options with a $140 strike price expiring on June 19 at the bid price of $18.141. The trade represented a $1.08million bullish bet.

Of the 13 total large Boeing option trades on Tuesday morning, nine were calls purchased at or near the ask or puts sold at or near the bid, trades typically seen as bullish. The other four trades represented calls sold at or near the bid or puts purchased at or near the ask, trades typically seen as bearish.

All four of the largest trades of the morning were bullish.

The timing and order sizes of the four largest put sales on Tuesday suggest they likely all came from the same source. All four orders were executed within two minutes. Two were for exactly 600 contracts and two were for exactly 756 contracts.

Why It's Important

Even traders who stick exclusively to stocks often monitor option market activity closely for unusually large trades. Given the relative complexity of the options market, large options traders are typically considered to be more sophisticated than the average stock trader.

Many of these large options traders are wealthy individuals or institutions who may have unique information or theses related to the underlying stock.

Unfortunately, stock traders often use the options market to hedge against their larger stock positions, and there’s no surefire way to determine if an options trade is a standalone position or a hedge. In this case, given the relatively large size of the largest Boeing trades, they could potentially represent an institutional hedge.

Orders Have Dried Up

Boeing has been one of the hardest-hit U.S. companies during the COVID-19 downturn. On Tuesday, Boeing said customers cancelled another 108 orders for its 737 Max airplane, bringing its order backlog below 5,000. Boeing also said it received zero new plane orders for the second month this year.

Boeing said it delivered just six planes in April, down 67% from a year ago.

Back on March 20, Boeing announced it was suspending its dividend and share buybacks in an effort to weather the COVID-19 downturn. The company also said it would be cutting 16,000 jobs and has raised $25 billion via a bond offering to help shore up its liquidity position as it weathers the downturn.

Boeing shares are now down 61% year to date, but some Wall Street analysts remain in the bull camp. On May 1, Goldman Sachs reiterated its Buy rating for Boeing with a $209 price target and said the bond offering alleviated Boeing’s liquidity crunch and significantly reduced investor risk.

Bullish sentiment among StockTwits messages mentioning Boeing was at 74.4% on Tuesday, up from 42.1% on March 12.

Photo by Steve Lynes via Wikimedia.