Delta shorts retreat as options traders turn bullish

Delta Air Lines heads into November with one of the cleaner setups in the airline sector: short sellers have cut positions sharply over the past month, options traders are leaning decidedly bullish, and the stock is outperforming most of its peers by a wide margin.

The positioning story is unusually constructive for a name in this sector. Short interest has fallen 22% over the past 30 days to 2.7% of the free float, a low level by any measure. The borrow market reflects no meaningful stress: availability is extraordinarily loose, with roughly 446 million shares available to borrow against roughly 17 million currently short, an availability reading of 4,430%. Cost to borrow is 0.49%, barely above the floor. What drove the earlier short buildup, which peaked at around 25 to 26 million shares in mid-October, coincided almost exactly with the Q3 earnings release on October 9, when the stock fell 2.5% on the day and 8.2% over the following week. Since then, shorts have unwound steadily. The ORTEX short score of 33.5 is the lowest in this 10-day history and moving further in that direction, confirming the retreat rather than any fresh bearish conviction. Options are pointing the same way: the put/call ratio of 0.44 is roughly one standard deviation below its 20-day average of 0.58 and close to the 52-week low of 0.42, meaning calls are dominating flow in a way that is unusually pronounced versus recent norms.

The Street remains broadly constructive, though it dialled back price targets following the October earnings miss. Around the time of the print, analysts at UBS, Wells Fargo, Bernstein, TD Cowen and Susquehanna all trimmed targets, mostly into the $95 to $105 range, while keeping positive ratings. BMO Capital went the other way, lifting its target to $105 from $100. The consensus mean target is around $101, which implies roughly 21% upside from the current $83.28. The stock trades at 11.9x trailing earnings and 7.3x EV/EBITDA. Those multiples have expanded modestly over the past 30 days (PE up around 0.9 turns, EV/EBITDA up 0.4 turns), reflecting the stock's recovery from the post-earnings low rather than any fundamental re-rating. Factor scores are mixed: forward EPS growth ranks in the 64th percentile, but near-term EPS momentum is weak, sitting in the 12th to 13th percentile on both 30-day and 90-day measures. EPS surprise history ranks 35th, below the median, consistent with the Q3 stumble. The dividend score of 89 is notable on paper, but the last dividend was paid in early 2020 and no payment has resumed since, so that figure likely reflects yield-relative metrics rather than an active dividend.

The clearest ownership story is Berkshire Hathaway, which held 57.3 million shares, or 8.8% of the company, as of June 30, and filed a 13G/A amendment in August disclosing its stake had grown from 6.1% to 8.7%. Warren Buffett's vehicle is by far the largest declared holder. Vanguard Capital Management and FMR (Fidelity) have each crossed the 5% disclosure threshold, with passive and semi-passive mandates. No 13D activists are on the register. Insider flow over the past 90 days has been net negative: CEO Edward Bastian sold 50,000 shares on October 29 at around $82, a discretionary sale (not under a 10b5-1 plan) worth $4.1 million. Earlier in August, Bastian exercised and immediately sold options worth around $19 million gross, as did President Peter Carter and EVP Alain Bellemare in similar paired transactions. The October sale stands out because it was discretionary and came after the post-earnings dip, not before it.

On the broader traffic picture, BTS data shows Delta's T-100 passenger count rising for three consecutive months through July, the latest available reading. Korea air traffic data, a proxy for one of Delta's international corridors, shows international passenger volumes falling for four straight months through September. Neither dataset has been measured as a leading indicator for Delta's reported financials, so these readings are context rather than a signal for the January print. Retail attention spiked in late October, with a Wikipedia view z-score of 2.0 as of October 21, above the 90th percentile of its own recent history. That attention spike aligns with the earnings week and the subsequent short unwind.

Among peers, UAL gained 2.4% on the week, almost in line with Delta's 2.2%. ALK matched that pace at 2.4%. AAL lagged at 1.7%, and LUV was essentially flat. JBLU surged 12.8% and ULCC jumped 17% on the week, though both gave back ground sharply on Monday, with ULCC dropping 12.9% on the day. Delta's relative stability within that dispersion is consistent with its premium positioning thesis that has driven a 15% year-to-date gain against a peer median that is deeply negative.

What to watch next: the Q4 earnings release, now pencilled in for January 8, will be the first clean test of whether the sharp short unwind since October was vindication of the bulls or simply the unwinding of a tactical earnings hedge, and whether Bastian's discretionary October sale foreshadowed any change in his view on the trajectory.