Just bought LUV puts (all my homies hate southwest)

Submitted by coliozenobio t3_zw8icl in wallstreetbets

Hey y’all long time lurker first time poster. Hoping to get advice and create some discussion around LUV. They cancelled my flight and 100s of thousands of other folks. Is buying puts here a good idea?

I just bought puts for the first time— am I doing this right? I think LUV will decline at least a little after all their bullshit. I studied finance but can’t seem to wrap my brain around puts. Would love your thoughts on the trade and LUV in general xoxoxo

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AC1114 t1_j1tdx5n wrote

Also affected by Southwest delays & cancellations.

It’s still a casino. Market could react to the news or give it a major middle finger and rise with the market if we have consecutive green days.

Nobody on WSB knows

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coliozenobio OP t1_j1te3ek wrote

Appreciate the response. Previous comment was meant to reply to thread

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coliozenobio OP t1_j1te15v wrote

https://preview.redd.it/wgtct5fucf8a1.jpeg?width=1170&format=pjpg&auto=webp&s=6e01e39d358c5615f4112d22df283090127e2d40

Thoughts?

−15

Nihaohonkie t1_j1tei58 wrote

They won’t fill at open as LUV will most likely be down already. Nice try

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coliozenobio OP t1_j1temjr wrote

How would you solve this problem? Buy lower at open? Buy lower now? Different platform even?

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mytendies t1_j1tewkw wrote

Market order in the am

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coliozenobio OP t1_j1teyij wrote

Epic, 6:20am alarm set

−1

ImmenatizingEschaton t1_j1tf75w wrote

Dude market orders can literally be anything someone types in as an order and you will be forced to purchase at that price. If you are gambling then do it. If you care about your money don’t.

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coliozenobio OP t1_j1tfcj6 wrote

I can just not exercise the put options, no? Then I’d just lose the contracts I bought (about $100)?

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ImmenatizingEschaton t1_j1tfvzb wrote

You don’t understand how this works. Don’t do it.

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coliozenobio OP t1_j1tg7an wrote

I’m pretty sure I understand… if I’m wrong about LUV, I would let the contact expire. I would not be forced to purchase at a certain price. I would lose $$ I spent to buy the contracts (total of about $100)

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ImmenatizingEschaton t1_j1tgsqp wrote

You don’t understand because the price is set at market, meaning literally whatever price someone happens to be selling the option at the time your market order executes. THAT is what you are risking.

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Outof_ITM t1_j1uhcd1 wrote

Oh boy, this is going to be fun. Please post a follow up to this.

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Peppa-Piggie t1_j1tp7b1 wrote

You never want to exercise. Lose out on value from IV.

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Bipolar_investor t1_j1tp9io wrote

Get more time. The strike price may be alright, bit you need to factor in a lot of things, including markets posting a giant green dildo going into year end

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alienatedframe2 t1_j1ujghb wrote

I am new and tried this as well haha. Would have been genius, if the bid price didn’t spike immediately upon market open.

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Weary-Pineapple-5974 t1_j1tfk1x wrote

Buy the rumor, sell the news. Remember this as the dumb trade blows up and gives you a big L.

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coliozenobio OP t1_j1tfnie wrote

Big L is only $100 though as I can just not exercise the position, right?

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Weary-Pineapple-5974 t1_j1tk8rx wrote

Totally not even in the right dimension of understanding basic options concepts. Go to Tastytrade.com and take the beginner options course, then simulate trading for 6-12 months on a paper trading account. $100 isn’t that expensive of a learning lesson, some traders nuke several hundred thousand dollars to get that coveted PhD in trading.

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KAY-toe t1_j1ueqz8 wrote

•Keep in mind that unless they’re cash-settled, options typically exercise automatically if they’re in-the-money at expiration unless the owner tells the brokerage not to in advance. So if they expire 0.01 or more ITM, i.e. if you’re right, at that time your brokerage is going to take (100 X the number of contracts you buy) shares from your account and sell them at the strike price. If you don’t own that many shares of LUV, unpleasantness will ensue.

•Per the other comments it looks like LUV stock will open with a gap down today, meaning if you didn’t already own the puts by last market close you won’t have any certain way to capitalize on it unless there’s an additional run downward, but the bigger the gap down the higher the put premiums will be.

•Betting that an event that hurt their reputation will hurt their stock price is one thing but if you’re doing this because you’re angry you experienced this but don’t have experience trading options then it’s very likely you’re going to lose money.

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firetocrates t1_j1txukx wrote

'I studied finance but can’t seem to wrap my brain around puts.'

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pattiemcfattie t1_j1u31r9 wrote

Oh man this is 2nd post I’ve seen dogging LUV. You know what that means? Time to buy calls.

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OO7Jesus t1_j1tmuod wrote

First off you have no idea how a market order works that shit won’t get filled, second you literally said in this post that you “love SouthWest and will continue using them” but want to open extremely short dated puts. Get your dick out of your hand and open a book ya regard

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Superdank888 t1_j1uii1q wrote

There’s a book that tells me how financially buttf*ck airlines?? Which one??

I’d gladly stick it to United tho. F*ck United

−2

I_C_da_G t1_j1ti970 wrote

Technically you have not bought them yet...and you probably won't get that price unless the LUV rises in price

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jamesd0e t1_j1te4qr wrote

I think I read they cancelled around 2800 flights today…yeah backlash?

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mattmustdie77 t1_j1u33ew wrote

"I can't wrap my brain around puts" that statement tells me you shouldn't by puts. Do more research. There's always other plays when you know what you're doing.

Or

Fuck it. It's your money

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WendyTheRetard_ t1_j1vz2au wrote

Bought 500 PUT contracts early this morning and the unfolding news is in my favor... Godspeed.

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Wespinforbro t1_j1tom9v wrote

market doesn’t react to delays; just a natural process of traveling. learned that lesson like 2 years ago

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[deleted] t1_j1templ wrote

I’m stranded and wanted to short these fucks aswell, had to book an AA flight now to get home. Honestly tho I will still use $LUV in the future

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coliozenobio OP t1_j1tewf9 wrote

Me too lol. Love southwest and use them exclusively in normal circumstances

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Superdank888 t1_j1uidpk wrote

How much did AA gouge for the last minute flight?

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[deleted] t1_j1vddsg wrote

The flight back from Oregon to Austin was $348 southwest, cancelled it and somehow managed to find a flight for $450 from AA. But it’s 3 days later from my original take off flight, stuck at my in-laws lol

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Penis_Just_Penis t1_j1tevmq wrote

I don't find them to be a good price. I'm always able to find a lower fare on Google flights.

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Iyrnx t1_j1tvek3 wrote

wait until he finds out its priced in

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dsausaaz t1_j1vei0e wrote

Bought 1/6 PUTS 🚀

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facetiousjesus t1_j1uqz5a wrote

“sTuDiEd FiNaNcE” where the South Harmon Institute of Technology?

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Ok_Monk219 t1_j1v36dm wrote

They are gonna get fined by DOT, they got a warning today

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palamedes23 t1_j1zb4v9 wrote

You're doing fine. I think Southwest has deeper problems in their infrastructure and staffing (read the interview with the president of their pilots union) that are now being shown which should result in stock declines. Wouldnt go into January with the trade though.

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IndianRegard t1_j1tezt6 wrote

How could you say luv will decline, what's left in life when there is no luv img

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Iyrnx t1_j1tvdh6 wrote

this, this is something else

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Superdank888 t1_j1uhd79 wrote

I bet it has a slight drop for a split second then it bounces with everyone else thinking they’re buying the dip and you end up bag holding

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CLNEGreen t1_j1uoprr wrote

Probably not a good idea. Naked options (puts or Calls)

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AntiqueWay7550 t1_j1uxvvj wrote

I love flying Southwest. I just don’t schedule flights at the busiest time of the year / time of the year with horrible weather.

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SuperBottit t1_j1v481w wrote

How'd this work out for you OP? You bought 2 ITM options at open with high IV.

Slight dip then came back. I got a feeling you're not seeing gains and won't.

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coliozenobio OP t1_j1v7c3p wrote

Update for all— the contracts I bought last night never executed, so I cancelled them this am and bought $104 of SPY 😊

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VisualMod t1_j1tdfdl wrote

>It is certainly possible that LUV will decline after cancelling so many flights, but it is also possible that the stock price will not be affected much at all. It really depends on how investors react to the news and whether or not they believe that LUV will be able to recover from this setback. As for puts, you seem to have a pretty good understanding of them. Buying puts gives you the right to sell shares of a stock at a certain price (the strike price), and if the stock falls below that price, you can make money off of your investment.

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kdfjeff t1_j1tlvre wrote

LUV makes and only cares about moving mail and freight, passengers are a after thought.

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PDT_FSU95 t1_j1u1s5l wrote

The cancellations weren’t necessarily market related. They were a ‘bomb cyclone’ weather event that was literally nationwide. Between power outages and high winds and heavy icing issues, it’s probable they did it due to a safety margin policy.

It sucks being stranded at an airport at no fault of your own, it’s better than reading about planes crash landing or having mechanical failures due to weather related/preventable issues.

My two cents. Guessing whatever the circumstances specifically, I doubt it will stop people from buying LUV flights. As a carrier, they are a better low end choice than the alla carte flyers.

I’d say the odds of winning this bet are very low in the contract length. Be ready to dump as soon as it’s in the money.

Sorry you all were stranded in various airports. That’s no way to spend travel time. Good luck to you!

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Current-Promotion-31 t1_j1ufeqn wrote

Well then I guess all airlines had the same cancelation rates right? Oh southwest had more than double the next highest and aa had virtually 0? So they must all be on track today then right? No. Southwest is bullshitting about the weather to get out of some reimbursements. Best explanation I saw is most airlines operate a spoke and wheel type setup where crew is more back and forth from the same hubs but southwest operates with crew on long runs of unrelated destinations for crew. When some crew got held up for weather AND the system for scheduling went down AND they had a massive "sick out" of employees to give them the finger, it broke them in a way no other airline was broken. Not unrecoverable, but definitely unique to them.

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PDT_FSU95 t1_j1uocq8 wrote

Nah, you’re right. They do have a ‘ponzi scheme’ style of doing business with the way they send pilots and crew to anywhere really and caused their own headache by not having the means to correct for these issues.

Maybe ‘employee shell game’ is a better description?

Anyways, I replied before seeing a more in-depth article and made regarded assumptions based on the knowledge I had at the time. Oh well.

I read the average cancellation for other carriers was around 2% vs 60-70% with southwest.

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