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December 19, 2012  Wed 3:16 AM CT

DAL: SEE CHART GET CHAIN FIND STRATEGIES
Delta Air Lines is climbing back toward the top of its 2012 trading range, and long-term positions are betting on a floor beneath the stock.

optionMONSTER's tracking systems detected the sale of 20,255 January 15 5 puts yesterday, dominated by a single print of 19,420 that went for $0.51. Open interest in the strike was a mere 37 contracts at the start of the session, so this is clearly new positioning.

The put sellers are betting that DAL will be above the $5 strike price at expiration in 25 months. If it is below that level at that time, the traders will face the obligation to buy the stock at an effective price of about $4.49 once the credit from the put sale is included. (See our Education section)

DAL gained 2.67 yesterday to close at $11.53, continuing its steep ascent since bouncing off the $9 level in mid-November. Shares have been trading for most of the year between about $8.50 and $12.

Yesterday's trading pushed total option volume in the name to triple its daily average for the last month.
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As discussed last week, when using the Stock Replacement Strategy to replace a stock position to trade direction, we want to use an option that has very similar characteristics to the stock. We talked about using the deep in-the-money, 80 to 85 delta option that is similar in the Greeks and has relatively little extrinsic value which tends to work against us in stock directional trading.

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