AAR CORP (AIR) provides products and services to commercial aviation and defense markets. The company’s stock is currently trading around $30.30 in a 52 week range of $13.27-$30.81. The stock has been massively outperforming the market this year adding more than 62% to share prices year to date. Options action in yesterday’s session would indicate that traders believe this run will continue through February of next year. Early in the session a trader bought 3,500 AIR Feb 35 calls for $0.55. This is an extremely bullish bet with an aggressive upside target. The stock is also trading very well on a chart with shares trading well above the Ichimoku Cloud. The future cloud is also strongly upward sloping suggesting the stock could continue higher. With stock trading just off of its 52 week highs and strong technical we believe that this order serves as confirmation of an opportunity to profit in AIR to the long side.
Trade: Buying the AIR Feb 25 Calls for $5.90
Risk: $590 per 1 lot
Reward: Unlimited
Breakeven: $30.90
This deep in the money call will allow a trader to participate in AIR upside right away. The high delta of this position also means that it will trade very much like stock. This trade also sets up well with a breakeven only $0.60 above the current stock price.
