Option Trade 
Alaska Air Group, Inc. (NYSE:ALK) Calls 
Tuesday, 19th April, 2016

**OPTION TRADE: Buy the ALK Jul 2016 85.000 call at approximately $3.00. Place a pre-determined sell at $6.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.20.

by Ian Harvey

April 19, 2016

Alaska Air Group, Inc. (NYSE: ALK), a holding company of Alaska Airlines Inc. (Alaska) and Horizon Air Industries Inc. (Horizon), reports earnings on Thursday, April 21st. The company will post its first-quarter results before the market opens, with analysts expecting the company to announce earnings of $1.40 per share and revenue of $1.34 billion for the quarter.

Expect a solid report from Alaska Air, as low fuel prices likely led to strong earnings growth for the company during the quarter. Alaska Air has a solid earnings track record, posting better than expected earnings each of the last ten quarters. One of the company’s main competitors, Delta Air Lines (DAL) has already reported its quarterly results, posting strong earnings growth resulting from huge savings in fuel costs. It is expected that the same is likely for ALK, and that the stock will move higher following the report. The stock has been trending higher over the last two months, but shares remain attractive, with a P/E of just 12.4 at the current price. Significant earnings growth should ensure and the stock to build on its recent gains.

The stock is trending higher, with shares up 1.6% on the year.

Alaska Air Group, Inc. has a 52-week low of $58.15 and a 52-week high of $87.17. The company has a market capitalization of $10.26 billion and a PE ratio of 12.54. The company has a 50-day moving average price of $79.81 and a 200 day moving average price of $76.92.

Alaska Air Group last released its quarterly earnings data on Thursday, January 21st. The company reported $1.46 earnings per share (EPS) for the quarter, beating the consensus estimate of $1.40 by $0.06.

During the same period last year, the company posted $0.94 earnings per share. The business earned $1.38 billion during the quarter, compared to the consensus estimate of $1.39 billion. The business’s revenue was up 5.4% compared to the same quarter last year. On average, analysts expect Alaska Air Group to post $7.55 EPS for the current fiscal year and $7.96 EPS for the next fiscal year.

A number of large investors have recently made changes to their positions in ALK, such as:-

• Lau Associates scooped up 200 additional shares in Alaska Air Group during the most recent quarter end, the firm said in a disclosure report filed with the SEC on Apr 11, 2016. The investment management firm now holds a total of 24,850 shares of Alaska Air Group which is valued at $2,047,143.Alaska Air Group makes up approximately 2.08% of Lau Associates’s portfolio.

• Creative Planning boosted its stake in ALK in the latest quarter; the investment management firm added 547 additional shares and now holds a total of 28,443 shares of Alaska Air Group which is valued at $2,232,207. Alaska Air Group makes up approx 0.02% of Creative Planning’s portfolio.

Alaska Air Group, Inc.‘s stock had its “buy” rating reissued by equities researchers at Buckingham Research in a report issued last Friday.

Also, several other equities research analysts have recently commented on the company.

• Deutsche Bank upped their price target on shares of Alaska Air Group from $77.00 to $86.00 and gave the company a “hold” rating.

• Zacks Investment Research upgraded shares of Alaska Air Group from a “hold” rating to a “buy” rating and set a $92.00 price objective for the company.

• Finally, Oppenheimer restated a “buy” rating on shares of Alaska Air Group.

• Alaska Air Group was Upgraded by BofA/Merrill to ” Neutral”.

• Alaska Air Group was Upgraded by JP Morgan to ” Neutral”.

One investment analyst has rated the stock with a sell rating, six have given a hold rating, ten have given a buy rating and one has given a strong buy rating to the company’s stock. The company currently has a consensus rating of “Buy” and an average target price of $90.38.

Harvey’s Options Volatility Indicator

Therefore, based on the facts above, and Harvey’s Options Volatility Indicator, the following option trade is recommended…..

**OPTION TRADE: Buy the ALK Jul 2016 85.000 call at approximately $3.00. Place a pre-determined sell at $6.00.

Note: No protective stop losses added -- but if you wish to do so make it $1.20.

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