Delta fundamentals are strong relative to peers, but technicals show broken support and fading momentum, suggesting consolidation near current levels.

Well, Delta had a strong year, with a year-on-year increase of over 40%. A three-year weekly chart, which somewhat reflects what we have seen from major airlines, such as Delta and United Airlines.

I mean, the stock was less than $40 just 3 years ago . Therefore, the price has more than doubled. The stock is currently trading around $82, but it has retreated from those record highs we saw.

Delta leads in premium seats, business travel, and international travel. They are the biggest player among the Big Four airlines, which are United, Delta, American Airlines and Southwest.

But if you look at Delta Air Lines, you'll find that it outperforms United, American and Southwest in this area, which is not surprising. They have better profit margins. They have less debt than other players in the sector .

So, yes, it's been a very strong 3 years that we've seen at Delta prior to this earnings event.

Now, if we narrow down the time frame and look at a one-day chart for one year, we find that the stock has risen by about 20%. We're taking a bit of a step back here today, but that's not surprising, is it?

Its revenues grew by 17% year-on-year in the last quarter . Premium revenues increased by 20% year-on-year , and the highest profit margins are found in international travel, business travel, and premium seats.

They do not add extra capacity. This is always important and will be something worth watching as this earnings event approaches. But you can see here from the 50-day simple moving average that it has essentially acted as support over the past several months, but we have broken through those levels.

We are now in a consolidation phase near those levels, and this is not surprising.

As for momentum, we saw some early momentum during September that has started to fade here . The Relative Strength Index is around 50, which we will continue to monitor , but also keep an eye on the 50-day Simple Moving Average.

It seems we are in a phase of gathering and perhaps we will find a base there.

Yes, I must say I was impressed by the ability to handle these high oil prices,

Well, implied volatility levels were relatively high before this report, which is not surprising, is it? We could see a significant movement in the stock. If you look at the options market , it prices a move of approximately plus or minus 4.3% in either direction on a daily basis, right? It's about $3.60 either way.

Therefore, I wanted to take advantage of the higher implied volatility in this test trade. This is a neutral strategy. You don't have to choose a specific direction. You are just hoping that the stock will continue to consolidate at or near these current levels of around $82 per share.

Therefore, I considered selling a short “Iron Condor” strategy. It is sometimes referred to as the short "Iron Butterfly" because I sell the buy and sell option at the same strike price here.

I went for the weekly October 9 option , so they are really short-term positions in this demo trade. Only one day remains until its expiry date. Where I will sell a call option at an execution price of 82 and a put option at an execution price of 82.

So, you are selling a "straddle" here. To offset the cost and limit the risks, we will purchase "Strangle". We will buy a put option with an execution price of 78 for going down, and we will buy a call option with an execution price of 86 for going up.

So, in essence, you are creating a short "vertical call" and a short "vertical put" at the same price as the shared short execution. You will receive a credit of approximately $3.

This is what you could potentially earn, $300 per price difference with a risk of about $100, but this is above the 86 level or below the 78 level. What you want to see is some consolidation here where the stock opens between the breakeven points of 79 and 85, then you buy it back at a lower price because the volatility will break down. So, a neutral strategy here.