Short term trade on American Airlines

American Airlines (AAL) trades at a P/E multiple of 2.96 right now, for a company that pays a 1.27% dividend and has been growing revenue and managing expenses this seems like a steep discount. The recent rise in crude oil prices from $26 to $49 has been a negative for the airline industry. With AAL shares hitting a recent 52 week low of $31 and bouncing back to $33 today, we are bullish on this stock.

We are selling the August $25 puts for $0.37 cents. They expire in 93 days, and if the stock drops below $24.63 we may have to buy the shares at that net price. We'd gladly purchases shares at that level as we believe that the American and US Air integration will yield economies of scale and operational efficiencies. We'd like to buy shares at current levels, however the overall market doesn't feel like it's on solid ground so we'll hold off on that for now. Goldman Sachs announced earlier today at they are neutral on equities, and we are aligned with that view that there isn't a good catalyst for new long positions unless you're picking specific equities that may outperform the broader market.