• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / Stocks

Here's How I'd Play Boeing, Though Delta Might Be a Better Option

Easing into the aircraft maker on its bad news is one way to go, as are call options expiring this Friday.
By STEPHEN GUILFOYLE
Mar 11, 2019 | 11:31 AM EDT
Stocks quotes in this article: DAL, BA, NVDA, LUV, AAL, UAL

Among our ranks, out there somewhere is the trader who paid $445 for Boeing Co. (BA) last week. I won't lie to you, I'm an aggressive fellow. 

Good thing I hang around smart people. As the guy with the pitchfork sits on one shoulder repeatedly telling me to grab some here, I think of the three-day rule. Wait ... there's a much safer way to play this.

I think of other times when I have sold short (naked) puts at distant strikes in high-priced, potentially volatile names. Thankfully, not today. I once spent months fixing a situation I put myself in concerning Nvidia Corp. (NVDA) . By the way, I did get out of that one alive, but it did become my focus for far too long. That was completely unnecessary.

So, no, we will not throw that wayward trader a life preserver down many percentage points from last week's highs. That said, is there something creative we can do to try to turn a buck as money moves across these markets? Always is. 

The What

On Sunday morning, just in case the reader is unaware, an Ethiopian Airlines Boeing 737 Max 8 took off from Addis Ababa. The intent was to land in Nairobi, Kenya. The aircraft lost contact six minutes later. At least at first glance, there are similarities between this crash that cost the 157 people on board their lives and the Lion Air crash five months ago off the coast of Indonesia that coast the 189 people on board that plane their lives.

The crew of that Lion Air 737 Max 8 was known to have battled to maintain control over their aircraft following what reportedly may have been some kind of equipment malfunction. On that front, Boeing has been working with the Federal Aviation Administration (FAA) to create a software fix for an anti-stall function designed for the 737 Max 8. That function, known as the MACS (Maneuvering Characteristics Augmentation System), was thought to have triggered a sensor reading that had repeatedly pushed that craft down prior to the crew losing control. No one knows if Sunday's problem is related. The black box, though damaged, was recovered. 

The Response

The Chinese government responded by grounding the nation's entire fleet across several carriers of 737 Max 8s. This is thought to impact less than 100 aircraft in total. Indonesia then followed China's lead. U.S. carriers that have taken delivery of the 737 Max 8 would be Southwest Airlines Co. (LUV) , American Airlines (AAL) and United Airlines (UAL) .

Southwest remains confident in the "safety and airworthiness" of its entire fleet. LUV flies 31 of these aircraft. American flies 24 of them. So far, I have not seen a major U.S. airline say anything along the lines of grounding the aircraft. 

Potential Ramifications

It's almost a certainty that the purchase of aircraft from Boeing will be a significant part of any trade deal that the U.S. and China might reach. Does this throw a monkey wrench in the works? My guess is only if indeed this crash is similar to the crash five months back. Only if this would create a significant delay in Boeing's ability to deliver. This obviously complicates matters, but I do not think this derails an agreement if everything else falls in place.

That said, the item is undeniably a bargaining chip. 

Boeing shares have rallied from early levels while I have been working on this piece. My thought is this: I may purchase a small amount of shares. I usually lead into a position with roughly one-eighth of my intended size. Here, it may be wise to start out with one-sixteenth. I would expect that the investor is going to have to create an average price over weeks. I would not enter above $387. For me, I need the initial tranche to be purchased between the 50-day simple moving average (SMA) of $382 and the 50% retracement level off of the 2019 rally ($368).

A risk-averse trader could purchase $405 calls expiring this Friday for a cool $4 or so, while selling $425 calls with the same expiration for about a buck. This way, there is a profit to be had and a technical snapback at a fixed expense. 

Better Idea

Delta Air Lines (DAL) trades at 7x forward-looking earnings, pays a better dividend (2.8%) than the competition, and it does not look like it has taken delivery of the aircraft in question. The way to play this news on a budget is to get long some Delta.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Guilfoyle had no positions in the stocks mentioned.

TAGS: Investing | Stocks | Aerospace | Airlines | Real Money | Stock of the Day

More from Stocks

Applied Materials Slips on Miss: Where Will the Chips May Fall

Bruce Kamich
May 20, 2022 1:00 PM EDT

Let's see what the charts say.

Consumer Confidence Is Shot

Bret Jensen
May 20, 2022 12:00 PM EDT

Until things start to improve for the average consumer, it is hard to see significant upward moves for either the markets or economic activity.

I'm Cautious on Marvell Technology Ahead of Earnings

Bruce Kamich
May 20, 2022 11:52 AM EDT

Let's review the charts and indicators.

Retail Stocks Are Moving Fast: Here's One That Might Be Worth Catching

Jonathan Heller
May 20, 2022 11:30 AM EDT

It is refreshing to visit a store that has the items in stock that it claims to on its website.

You Can Trade and Invest in Palo Alto Networks: Here's How

Stephen Guilfoyle
May 20, 2022 11:00 AM EDT

It still takes a bit of guts and some nose holding to keep this stock on board in this environment.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 10:10 AM EDT JAMES "REV SHARK" DEPORRE

    This Weekend on Real Money

    "Market Timing for Dummies"
  • 01:44 PM EDT STEPHEN GUILFOYLE

    Stocks Under $10 Portfolio

    We're making a series of trades here.
  • 03:07 PM EDT PAUL PRICE

    Why Is Walmart Down Big Today?

    Besides its poor earnings report Walmart was way...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data & Company fundamental data provided by FactSet. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by FactSet Digital Solutions Group.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

FactSet calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login