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The Thing About Delta Air Lines…

by | Dec 18, 2023

Dear Fellow Trader:  

I love Delta Air Lines. I’m a Gold member. When I fly to Baltimore, I stop in Atlanta to get the points rather than take a direct flight out of Fort Myers. Yes… I’m that loyal.

I also love to trade Delta stock…

Today, I want to show you how our successful Delta Air Lines Inc. (NYSE: DAL) trade has worked.  

You can do it at home if you have a deeper understanding of events in the financial markets that create unparalleled opportunities. On Nov. 19, 2023, I recommended that my fellow traders sell a put spread on Delta, specifically targeting two puts to build the trade.  

But a lot of work went into this analysis. And today, I’m going to walk you through it.  

This is the insider story of how I’m 11-2 this year with an 85% win rate on closed trades (and several winners like Delta Air Lines right now). 

 How Do We Do It?  

Step 1: Follow the Insiders  

The strongest anomaly in the financial markets is the insider buying efforts of executives at their own companies. I’m not talking about illegal insider trading. I’m talking about the targeted purchases of executives like CEOs and CFOs, who buy at specific times in certain conditions. When executives buy their stock, they file a Form 4 document with the SEC, which is typically released to the public within 48 to 72 hours.

A study at the University of Michigan showed that insiders exploit opportunities in the market — and there is typically a significant pop between the time that the insiders buy and when the announcement comes. They know the true value of the company. They have insight into the future. And they are disclosing their purchases.  

I track the executive insider buying of thousands of companies, but we like to focus on the ones with very liquid options chains with lots of volume.  

One Oct. 31, the SEC reported that Delta director David Taylor purchased $307,500 in company stock four days prior. The average share price was $30.75. 

Here’s the SEC document from the website SECForm4.com.  

SEC Form 4

That purchase came a week after he bought another $330,900  at an average price of $33.09 per share.  

We now had a target, and we recognized a very liquid options chain on Delta. The stock typically has a daily trading volume north of 9 million shares.  

And we can see on the options chain that there’s ample open interest and activity.  

Here’s the Jan. 19, 2024, put option chain. There’s a relatively nice spread here on this stock, which allows us to start to pick positions. 

Delta options chain

Step 2: Check on the State of Momentum and Sector Strength 

The next thing we did was check on the state of our indices, which turned positive at the beginning of November. Each morning, we assess the full flows of the market by measuring statistical metrics on a very specific number of stocks to determine broader sentiment and the momentum trend. When these readings turn red, we focus on cash, build trades around positive sectors, or take inverse positions against indices. When it is positive, we focus on short-squeeze stocks, companies with improving fundamentals, and trading/investing around the actions of corporate insiders. 

In the latter case, we focus on insider buying with spread selling. The last thing we needed to do was check on the state of the sectors linked to Delta. We looked to see that our readings on both Industrials and Consumer Discretionary were positive. 

Step 3: Find the Put Spread 

Selling put spreads is easy. And they’re great in positive conditions on very liquid stocks.  

When we talk about trading options, we want to sell them — not buy them. That’s because we can see ahead of time the odds of success when we sell options, and Out-of-the-money (OTM) options typically favor the seller by a wide margin.  

  1.   If the stock goes up, the value of the spread goes down. As a result, we make money.
  2.   If the stock just trades sideways, the value of the spread will decay. As a result, we’d make money.
  3.   If momentum is positive and the stock pulls back, we’d be happy to own it at a lower level. But if momentum goes negative, we can just cut our losses and look for an opportunity to reenter this position.

Now, here’s the way that I like to make these trades.  

I’m looking for a trade with a probability of profit at 80% or higher. And I want to target returns typically above 15%. 

So, we found one on Nov. 16.  

We targeted the Dec. 29, 2023, Delta $31-$33 put spread. 

Step 4: Execute the Trade 

We did so because the value of the spread — and the breakeven price would be less than the cost of the stock that the director purchased in October at $33.09. 

We sold this spread for $0.31 (or $31 for 100 shares).  

And it required $169 in margin.  

At the time, the stock was trading at $35.51.  

Our breakeven on the trade was $33.00 minus $0.31… 

Or $32.69.  

What happened next?  Insider buying plus momentum drove this stock to $42 last week.  

Step 5: Take the Win 

The spread is currently trading… for $0.01. 

We could buy it back for $0.01… (plus an additional $1.30 in contract costs). This would give us a net win of $28.7 per contract (a 17% gain) 

Or we can just let it expire in two weeks, given our significant cushion. If we close it next Friday because of expiration, we pay no fees and a net of 18.3%.  

That’s a great win either way. 

This is what we do at Executive Payouts Unlimited. This is designed to focus on insider buying and momentum to create great double-digit winners with high probabilities of success. It requires patience and diligence. You can do all the work… or we can do it together.  

Chat soon,

Garrett signature



Garrett Baldwin

*This is for informational and educational purposes only. There is an inherent risk in trading, so trade at your own risk. 

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WRITTEN BY<br>Garrett Baldwin

Garrett Baldwin

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