Our final Income Madness position is vexing us. The United Airlines (UAL) Mar Week Four (3/24) 49 Put is deep in the money after falling more than 20% since we entered the position.
The company surprised the Street when it warned of a first-quarter loss, citing weaker demand and higher fuel costs. The news hit the stock hard, and it has continued to decline despite the fact that airline passenger demand remains strong.
Shares look extremely undervalued with a forward P/E of 4.2, which is less than half the airline industry’s P/E of 11.1, according to Zacks.
I know many of you have already been assigned shares. Therefore, we will accept shares and recommend a call to sell soon to reduce our cost basis.
Current Stock Price: $40.92
Cash in Hand: $0.46
Action: Accept shares
Cost Basis: $48.54