Ashish S

Are Airlines Stocks a Contrarian Opportunity?

The trade as you present it is simply a leveraged bet on the decline of oil prices. If that is your view, I don't see why you wouldn't make a more direct bet on oil, like buying puts.

Also, if you are most bullish on the airline that is "best managed" primarily on the basis of hedging its oil exposure, wouldn't this airline have the least to gain from a correction in oil prices? Airlines that have been punished because of insufficient hedging would gain much more. In fact, you might be best off shorting the hedger and going long another to really capture your view on oil prices declining.