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Why Delta Air Lines’ Short Interest Has Risen since 1Q18

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Delta Air Lines’ short interest

As of April 30, the data show that Delta Air Lines’ (DAL) short interest has increased since it announced its 1Q18 earnings. This indicates that the bearish sentiment in the stock has increased.

As of April 30, Delta Air Lines’ short interest as a percentage of its outstanding shares stood at 2.2%, a rise from 1.7% as of April 13. During the same period, the stock’s price fell from $52.9 to $52.22.

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Why is short interest rising?

One of the major reasons for the rise in DAL’s short interest is the high price of crude oil. Higher crude oil prices could have an adverse impact on airlines, as it’ll increase their operating costs in a big way, which in turn could negatively affect operating profits. It appears that the bearish mood on DAL will be here until oil’s price comes down. Since the beginning of 2018, Brent crude oil has risen 16.9%.

Short interest ratios

In terms of the number of shares, Delta Air Lines’ short interest is at ~15.6 million. Delta Air Lines’ average trading volume is ~7.0 million shares, which means it has a short interest ratio of ~2.20x. This ratio indicates that it would take two days to cover all of the stock’s short positions. Let’s take a look at its peers’ short interest ratios.

  • American Airlines’ (AAL) short interest is 25.8 million shares. Its average number of shares traded is 5.3 million. Its short interest ratio is ~4.9x, which indicates that it will take five days to cover all the short positions in its stock.
  • Southwest Airlines’ (LUV) short interest is 11.2 million, while its average number of shares traded is 5.0 million. The short interest ratio indicates that it will take two days to cover all the stock’s short positions.
  • JetBlue Airways’ (JBLU) short interest ratio stands at ~3.2x. The ratio indicates that it will take three days to cover all the stock’s short positions.

Investors can hold Delta Air Lines indirectly by investing in the Industrial Select Sector SPDR ETF (XLI). PEJ has invested 1.5% of its portfolio in Delta Air Lines as of May 10.

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