Trader bets big on this airline stock

The rally in airline stocks lost steam Tuesday after the crude crush reversed course. Despite the dip, United Continental, Delta and JetBlue are up a respective 3, 5.6 and 3 percent in the last week, and one trader thinks the good times could continue for one of these names in particular.

On Monday, when Delta shares rallied more than 4 percent, one trader bet $3.5 million that the stock could soar to a new high by the end of next week. Specifically, that trader bought 45,000 December 52.50-calls for 77 cents each. Since each options contract accounts for 100 shares of stock, this is a nearly $3.5 million bet that Delta will be above $53.27 by next Friday. That's a 5 percent rally from the stock's current price of around $50.60 and puts shares at an all-time high.

Read MoreI see oil bottom higher than I did before: Analyst

"This is a lot of premium playing for a big breakout," Dan Nathan told CNBC's "Fast Money" on Monday. "The trade is obviously targeting Fed week, but also continued lower lows in crude oil."

Supply and demand concerns have crushed the crude oil market this year. The commodity has fallen more than 30 percent, which has helped many of the airline stocks to outperform the broader market. Southwest, JetBlue and Delta are up a respective 12, 64 and 7 percent in 2015 while the S&P 500 is flat.

Wall Street also expects Delta to soar to new highs. According to FactSet, of the 15 analysts who cover the stock the average price target is $61.64 with a buy rating.


Host Bio

  • Melissa Lee

    Melissa Lee is the host of CNBC's “Fast Money” and “Options Action.”

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