Dow Jones Transportation Average Index Options

Best Binary Options Brokers 2020:
  • Binarium
    Binarium

    The Best Binary Options Broker 2020!
    Perfect For Beginners!
    Free Trading Education, Free Demo Account!
    Get Your Sing-Up Bonus Now!

  • Binomo
    Binomo

    Good Broker. Only For Experienced Traders!

Contents

Dow Jones Transportation Average Index Options

DJTA index options are option contracts in which the underlying value is based on the level of the DJTA, a price-weighted equity index of 20 of the largest, most liquid transportation companies listed on the NYSE and the Nasdaq stock exchange.

The Dow Jones Transportation Average index option contract has an underlying value that is equal to 1/10th of the level of the DJTA index. The Dow Jones Transportation Average index option trades under the symbol of DTX and has a contract multiplier of $100.

The DTX index option is an european style option and may only be exercised on the last business day before expiration.

Product Name Symbol Underlying Value Contract Multiplier Exercise Style
Dow Jones Transportation Average Options DTX 1/10th of DJTA $100
(Full Contract Specs)
European

How to Trade DJTA Index Options

If you are bullish on the DJTA, you can profit from a rise in its value by buying Dow Jones Transportation Average (DTX) call options. On the other hand, if you believe that the DJTA index is poised to fall, then DTX put options should be purchased instead.

The following example depict a scenario where you buy a near-money DTX call option in anticipation of a rise in the level of the DJTA index. Note that for simplicity’s sake, transaction costs have not been included in the calculations.

Example: Buy DTX Call Option (A Bullish Strategy)

You observed that the current level of the DJTA index is 2,777.95. The DTX is based on 1/10th of the underlying DJTA index and therefore trades at 277.80. A near-month DTX call option with a nearby strike price of 280 is being priced at $18.52. With a contract multiplier of $100.00, the premium you need to pay to own the call option is thus $1,852.00.

Assuming that by option expiration day, the level of the underlying DJTA index has risen by 15% to 3,194.64 and correspondingly, the DTX is now trading at 319.46 since it is based on 1/10th of the underlying DJTA index. With the DTX now significantly higher than the option strike price, your call option is now in the money. By exercising your call option, you will receive a cash settlement amount that is computed using the following formula:

Cash Settlement Amount = (Difference between Index Settlement Value and the Strike Price) x Contract Multiplier

So you will receive (319.46 – 280.00) x $100 = $3,946.43 from the option exercise. Deducting the initial premium of $1,852.00 you paid to buy the call option, your net profit from the long call strategy will come to $2,094.43.

Profit on Long DTX 280 Call Option When DJTA at 3,194.64
Proceeds from Option Exercise = Cash Settlement Amount
= (Index Settlement Value – Option Strike Price) x Contract Size
= (319.46 – 280.00) x $100
= $3,946.43
Investment = Initial Premium Paid
= $1,852.00
Net Profit = Proceeds from Option Exercise – Investment
= $3,946.43 – $1,852.00
= $2,094.43
Return on Investment = Net Profit / Investment
= 113%

In practice, it is usually not necessary to exercise the index call option to take profit. You can close out the position by selling the DTX call option in the options market. Proceeds from the option sale will also include any remaining time value if there is still some time left before the option expires.

In the example above, as the option sale is performed on expiration day, there is virtually no time value left. The amount you will receive from the DTX option sale will still be equal to it’s intrinsic value.

Limited Downside Risk

One notable advantage of the long Dow Jones Transportation Average call strategy is that the maximum possible loss is limited and is equal to the amount paid to purchase the DTX call option.

Suppose the DJTA index had dropped by 15% instead, pushing the DTX down to 236.13, which is way below the option strike price of 280. Now, in this scenario, it would not make any sense at all to exercise the call option as it will result in additional loss. Fortunately, you are holding an option contract, and not a futures contract, and so you are not obliged to anyway. You can just let the option expire worthless and your total loss will simply be the call option premium of $1,852.00.

You May Also Like

Continue Reading.

Buying Straddles into Earnings

Buying straddles is a great way to play earnings. Many a times, stock price gap up or down following the quarterly earnings report but often, the direction of the movement can be unpredictable. For instance, a sell off can occur even though the earnings report is good if investors had expected great results. [Read on. ]

Writing Puts to Purchase Stocks

If you are very bullish on a particular stock for the long term and is looking to purchase the stock but feels that it is slightly overvalued at the moment, then you may want to consider writing put options on the stock as a means to acquire it at a discount. [Read on. ]

What are Binary Options and How to Trade Them?

Also known as digital options, binary options belong to a special class of exotic options in which the option trader speculate purely on the direction of the underlying within a relatively short period of time. [Read on. ]

Investing in Growth Stocks using LEAPS® options

If you are investing the Peter Lynch style, trying to predict the next multi-bagger, then you would want to find out more about LEAPS® and why I consider them to be a great option for investing in the next Microsoft®. [Read on. ]

Effect of Dividends on Option Pricing

Cash dividends issued by stocks have big impact on their option prices. This is because the underlying stock price is expected to drop by the dividend amount on the ex-dividend date. [Read on. ]

Bull Call Spread: An Alternative to the Covered Call

As an alternative to writing covered calls, one can enter a bull call spread for a similar profit potential but with significantly less capital requirement. In place of holding the underlying stock in the covered call strategy, the alternative. [Read on. ]

Dividend Capture using Covered Calls

Some stocks pay generous dividends every quarter. You qualify for the dividend if you are holding on the shares before the ex-dividend date. [Read on. ]

Leverage using Calls, Not Margin Calls

To achieve higher returns in the stock market, besides doing more homework on the companies you wish to buy, it is often necessary to take on higher risk. A most common way to do that is to buy stocks on margin. [Read on. ]

Day Trading using Options

Day trading options can be a successful, profitable strategy but there are a couple of things you need to know before you use start using options for day trading. [Read on. ]

What is the Put Call Ratio and How to Use It

Learn about the put call ratio, the way it is derived and how it can be used as a contrarian indicator. [Read on. ]

Understanding Put-Call Parity

Put-call parity is an important principle in options pricing first identified by Hans Stoll in his paper, The Relation Between Put and Call Prices, in 1969. It states that the premium of a call option implies a certain fair price for the corresponding put option having the same strike price and expiration date, and vice versa. [Read on. ]

Understanding the Greeks

In options trading, you may notice the use of certain greek alphabets like delta or gamma when describing risks associated with various positions. They are known as “the greeks”. [Read on. ]

Valuing Common Stock using Discounted Cash Flow Analysis

Since the value of stock options depends on the price of the underlying stock, it is useful to calculate the fair value of the stock by using a technique known as discounted cash flow. [Read on. ]

Dow Jones Transportation Average

Apr 9, 2020, 12:26 p.m.

Latest News

    /news/latest
  1. 12:23p

New York state sees biggest one-day death tally from coronavirus at 799 fatalities

nasdaq

s&p 500

Kiosk

Virtual Stock Exchange

  • Site Index
  • Topics
  • Help
  • Feedback
  • Newsroom Roster
  • Media Archive
  • Premium Products
  • Mobile
  • Company Info
  • Code of Conduct
  • Corrections
  • Advertising Media Kit
  • Advertise Locally
  • Reprints & Licensing
  • Your Ad Choices
  • Follow MarketWatch
  • Copyright © 2020 MarketWatch, Inc. All rights reserved.
    By using this site, you agree to the Subscriber Agreement & Terms of Use (Updated 03/26/2020) Privacy Notice and Cookie Notice.

    Dow Jones Transportation Average

    8,315.75

    Previous Close
    8,152.39

    Your Watchlist

    Customize MarketWatch

    Have Watchlists? Log in to see them here or sign up to get started.

    No Items in Watchlist

    There are currently no items in this Watchlist.

    No Saved Watchlists

    Create a list of the investments you want to track.

    Uh oh

    Something went wrong while loading Watchlist.

    Recently Viewed Tickers

    No Recent Tickers

    Visit a quote page and your recently viewed tickers will be displayed here.

    Overview

    Key Data

    • Open 8,290.63
    • Day Range 8,219.33 – 8,425.45
    • 52 Week Range 6,481.20 – 11,359.49

    Performance

    5 Day
    • 11.69%
    1 Month
    • 14.56%
    3 Month
    • -24.58%
    YTD
    • -23.72%
    1 Year
    • -22.90%

    Recent News

    • MarketWatch
    • WSJ

    FedEx, UPS stocks surge as investors cheer news of Amazon pausing test of competing service

    Delta’s stock rallies, on track to end losing streak, again

    Shares of Delta Air Lines Inc. rallied 3.5% in afternoon trading, which puts them on track, again, to snap a losing streak. The stock had plunged 29.8% amid an eight-session losing streak through Tuesday. But in five of those losing sessions, including the past four sessions, the stock had traded in positive territory intraday only to lose those gains at the close. On Tuesday, the stock was up as much as 15.8% at its intraday high of $25.85, only to close down 0.3%; at 2 p.m. ET on Tuesday, the stock was still up about 2.9%. The latest losing streak is only the longest suffered in less than two months, as the stock tumbled 22.4% amid an 11-session losing streak through Feb. 28. The stock has tumbled 60.9% over the past three months, while the U.S. Global Jets ETF has shed 54.9% and the S&P 500 has declined 16.5%.

    United Airlines stock soars 18.4% to pace Dow transports’ premarket gainers

    Alaska Air subsidiary’s apply for CARES Act payroll grants, sees ‘sizable’ capacity cuts coming

    Alaska Air Group Inc. disclosed Monday that its Alaska Airlines Inc. and Horizon Air Industries Inc. wholly-owned subsidiaries have applied for payroll grants under the Coronavirus Aid, Relief and Economic Security (CARES) Act. The air carrier said a ground services subsidiary of Alaska Airlines, McGee Air Services Inc., has also applied for payroll support grants. “Given the uncertainty about when demand may bottom out and when a recovery may begin, the CARES Act payroll support grants will be critical as we weather the challenging months ahead,” Alaska Air said in a statement. The company said it has cut capacity by 80% in April an dMay as demand has dropped in the wake of the COVID-19 pandemic. The company said it will update capacity reductions for June at a later date, but based on current trends, “sizable cuts will be necessary for the coming months.” The stock surged 8.1% in afternoon trading. It has shed 61% over the past three months, while the Dow Jones Transportation Average has lost 29% and the Dow Jones Industrial Average has dropped 22%.

    United Airlines slashes threshold for Premier status, extends time to book cancelled flights

    United Airlines Holdings Inc. said Monday it was reducing thresholds to qualify for Mileage Plus Premier status for 2021 by 50% for each status level. Current 2020 Premier status members will have Premier status extended to Jan. 31, 2022. The air carrier said as part of a promotion from May 1 to Dec. 31, 2020, it is doubling Premier qualifying points (PQP) for United Explorer cards and quadrupling PQP for the United Club cards. And those with travel certificates, as a result of having travel plans disrupted by the COVID-19 pandemic, will now have two years drom the date issued to book a new flight, and an additional 11 months to travel. The stock fell 0.6% in morning trading, while the Dow Jones Transportation Average rose 4.5% and the Dow Jones Industrial Average rallied 994 points, or 4.7%.

    Airlines are canceling flights, burning through cash as passengers stay home to shelter from coronavirus

    American Airlines stock’s falls toward fresh record low

    Shares of American Airlines Group Inc. , which tumbled 7.9% toward a fresh record low in afternoon trading Friday, after the air carrier said it would cut international capacity by 60% for the “peak” summer travel season. The stock has now erased all of its late March bounce, in which it rocketed 53% in three days off its previous record low of $10.25 on March 23. Since peaking at $15.66 on March 26, the stock has now lost 41% to $9.27 amid a 6-day losing streak. American’s move to cut international summer capacity comes as analyst Myles Walton at UBS said the first look at June for airlines is “surprisingly awful,” as realized bookings for March, April and May worsen. American’s stock was the biggest loser among the Dow Jones Transportation Average’s components on Friday. Among other airline components, shares of United Airlines Holdings Inc. shed 4.3%, Southwest Airlines Co. slid 3.7%, JetBlue Airways Corp. gave up 3.0%, Delta Air Lines Inc. declined 2.1% and Alaska Air Group Inc. fell 0.7%. Meanwhile, the Dow transports was down 2.3% and the Dow Jones Industrial Average dropped 395 points, or 1.9%.

    Best Binary Options Brokers 2020:
    • Binarium
      Binarium

      The Best Binary Options Broker 2020!
      Perfect For Beginners!
      Free Trading Education, Free Demo Account!
      Get Your Sing-Up Bonus Now!

    • Binomo
      Binomo

      Good Broker. Only For Experienced Traders!

    FedEx remains in compliance with debt covenants, sees results hurt by increased FedEx Ground demand

    FedEx Corp. said Friday that, including the recent proposed debt offering, it expects to remain in compliance with its debt covenants, but indicated there was risk that it may need to amend the covenants if addtional financing is required and results deteriorate further. The package delivery service said that although it has seen increased demand for its FedEx Ground delivery service in the U.S., as shelter-in-place measures in response to the COVID-19 pandemic has boosted demand for e-commerce, the shift in sales mix is expected to hurt margins and operating results. Results have also been impacted by “significantly weaker global economic conditions” as a result of the COVID-19 pandemic. The company’s current debt covenant requires the ratio of debt to consolidated earnings before interest, taxes, depreciation and amortization (adjusted EBITDA) to be no higher than 3.5 to 1.0; as of Februay 29, that ratio was 2.8 to 1.0. after previously announced borrowings and proposed offerings, FedEx expects to remain in compliance with the debt-ratio covenant. “However, if we secure additional financing or experience a deterioration in results of operations that would cause us not to be in compliance with the covenant, we would have to seek to amend this covenant. No assurances can be made that such amendment would be approved by our lenders,” the company said in a statement. Separately, FedEx said it has implemented temporary surcharges on all international shipments, and has temporarily eliminated its money-back guarantee for all delivery services. The stock, which fell 3.7% in morning trading, has lost 25.6% year to date, while the Dow Jones Transportation Average has dropped 32.4% and the Dow Jones Industrial Average has declined 25.7%.

    United Airlines stock tumbles 17% to pace Dow transports’ decliners

    XPO Logistics cancels terminates strategic review, that could have led to sale of business units

    XPO Logistics Inc. disclosed Friday that it has terminated the previously announced review of strategic alternatives, “in light of current market conditions.” The transportation and logistics company’s stock had surged 15.1% to $95.35 on Jan. 16, after the company said it might sell off one or more of its business units as part of the strategic review. The stock, which was still inactive in premarket trading, has tumbled 57.7% over the past month, amid concerns over the impact of the coronavirus outbreak. Over the same time, the Dow Jones Transportation Average has dropped 35.8% and the Dow Jones Industrial Average has lost 31.3%.

    FedEx’s stock rallies in a bad market, with Wall Street encouraged by China ‘rebound’

    Avis’s stock plummets toward worst day in 22 years

    Shares of Avis Budget Group Inc. took a 40% dive toward an 11-year low in midday trading Wednesday, as they led the Dow Jones Transportation Average’s losers by a wide margin. The rental car company’s stock was headed for the biggest one day selloff in 22 years, behind only the record 46.5% plunge on April 16, 1998. The next biggest Dow transports decliners were shares of United Airlines HOldings Inc. , which shed 29%, and Delta Air Lines Inc. , which lost 27%. Avis’s stock has now lost more than three-quarters of its value (down 77%) so far this month, which would be its worst-ever monthly performance, as recession fears mounted in the face of the COVID-19 pandemic.

    Alaska Air to cut April capacity by 10%, suspends stock buybacks as part of COVID-19 response

    Alaska Air Group Inc. disclosed a number of actions it was taking as a result of the COVID-19 pandemic, including an immediate reduction in April capacity by at least 10% and in May capacity by 15% from its original expectations. The air carrier said it was also pursuing additional borrowing of about $500 million; suspending at least $300 million worth of capital expenditures; suspending share repurchases, offering employees unpaid leaves of absences for 30, 60 and 90 day time frames; freezing hiring across the company; and has cut salaries of Chief Executive Brad Tilden and President Ben Minicucci to zero. The company said it expects to make other changes and take other cost cutting measures over the next several weeks as demand changes. The company said it has recently seen load factors decline through the month, as “materially fewer bookings” occur, offset by “significant cancellations.” Typically, the company said load factors increase steadily in the month, leadikng up to the travel departure date. The stock, which tumbled 16.4% toward a 6 1/2-month low, has plummeted 52% over the past month, while the Dow Jones Transportation Average has dropped 33% and the S&P 500 has fallen 26%.

    United Airlines sees March revenue down $1.5 billion from last year, to cut April and May capacity in half

    United Airlines Holdings Inc. said Sunday that it is projecting March revenue will be $1.5 billion lower that a year ago, as the air carrier said there have been more than one million fewer passengers in just the first two weeks of the month as a result of the COVID-19 pandemic. “The bad news is that it’s getting worse,” Chief Executive Oscar Munoz and President Scott Kirby said in a message to the airline’s nearly 100,000 employees. “We expect both the number of customers and revenue to decline sharply in the days and weeks ahead.” United said it decided over the weekend to cut salaries of corporate officers by 50%, have held discussions with union leadership about how to cut payroll expenses and will announce on Monday that it will reduce capacity by 50% for April and May. Even with the cut in capacity, load factors are expected to drop into the 20% to 30% range, “if things don’t get worse.” United’s stock has plunged 47.7% over the past month through Friday, while the Dow Jones Transportation Average has shed 26.9% and the Dow Jones Industrial Average has lost 21.1%.

    Best Binary Options Brokers 2020:
    • Binarium
      Binarium

      The Best Binary Options Broker 2020!
      Perfect For Beginners!
      Free Trading Education, Free Demo Account!
      Get Your Sing-Up Bonus Now!

    • Binomo
      Binomo

      Good Broker. Only For Experienced Traders!

Like this post? Please share to your friends:
Binary Options Guide For Beginners
Leave a Reply

;-) :| :x :twisted: :smile: :shock: :sad: :roll: :razz: :oops: :o :mrgreen: :lol: :idea: :grin: :evil: :cry: :cool: :arrow: :???: :?: :!: