Bull v. Bear: BA Sees Next Reputation Hit in 737 MAX 10 Certification Delay

to Fast Market right here on Schw Network. Boeing is trading higher today despite a report from Bloomberg that the FAA may delay certification of the 737 Max ten aircraft. The repo says the agency is investigating a potential issue with software developed b GE aerospace. The stock fell nearly 7% yeste on the news of a software glitch that could affect landings. So let's welcome back the co-hosts, Tom White and Kevin Henkes, both here now. We talked a lot about, Kevin. And now I want to get yourhoughts here as we take a look at the stock and how it's behaving in your the latest headlines. Yeah. A little bit of a be, a little bit of recovery today in Boeing off a hard sell off yesterday basically because the FAA did come out and s here's the quote. Aircraft flying today are safe. And the glitch doesn't take away the control tI think, a key part of it. Yes. This is a problem that came up through GE aerospace. But and the FAA did delay the certification of the 737 Max. But a lot o analysts are coming out and talking about it. And experts are coming out discussing it might justa few weeks until they can get the software cleaned up and get it recertified or back on track. So it's not great news. Make no mistake, if you're a Boeing investor, this is not whatu're f headlines. As this company tries to crawl back to profitability and get healthy again by selling planes, delivering planes, and getting their get getting their balance sheet healthy and their cash flow healthy. This is not what you wanted to hear yesterday from Boeing. So little b a relief as it may not be as bad as originally thobut it's certainly not good. Nicole and Tom, it's a tough name because it's a great American company that people love and are National security depends on it, but it's the kind of name that really gets affected by the hea day after day, year after year. We've been doing this for so many years, and soany of the headlines have moved this stock around, but it did have a high of 2.54 and it's at 188. Now. Tom, your thoughts on Boeing. Yeah. You knowt just you know more disruptions. I think in production. I think that's going key. They're trying to get to that 47 airplanes a month target. They're not making it right now. So these disruptions are hurting outlook for free cash flow. Right. They just recently gave an update at one of the conferences on industrials that basi they're still in that 1 to $3 billion range as far as free cash flow for this fiscal year, they're probably not going to make 2 billion, thempae disruptions, whether it's 737 Max certification, whether it's 787 Dreamliner with some of the engines that have been stalled. But this company has got a seven year backlog of planes and orders thate not yet been filled. That's about $715 billion in undelivered aircraft. So, yeah, they've got the orders, right? They just to execute better. But this is the problem with Boeing is t they stumble sometimes. And, you know, you look ate of the commentary, Bank of America came out with a note r after this happened said the financial impact is manageable. But this is going to be a tation, the company said they still have a buy rating, lik believe, a $270 price target on the shares. But you look at theirs recently, Turkish Airlines just ordered 150 jets. Ko Air just announced 103 at air out of India. They theyv3 Boeing Max planes. They might order 200 more. There was a caveat that China was going to order more than the 200 that they announced previously with the administration, but that didn't come to fruition durin Xi's visit also. So maybe that's putting some pressure with the stock. You know, just yesterday hit nearly ten month lows in the in the shares. So yeah, I think there's you know, investors are still trying to figure this out and they just need to get production up and free cash flow so they can hit that goal of 10 billion in the next two years. Yeah. They contin have all the parameters put in the FAA working closely t try a this right. Remember the issue they had with the door. They've had a lot of issues, but they they then right the ship, you know, new leadership and such. Let's take a look at the stock in the charts here. Kevin, you're starting u off with an example. Trade please. Yes. If you have the opinion that this is something that you would buy the dip in and a long ter bullish posture on Boeing. could look at a trade something like this. Like I sf this is a paper money trade going out to the October So giving us giving yourself an entire month for all these issues to pass over. If you think it's going to be longer, maybe you extend that date out even longer. But I looked the expected move out to October 30th. It was about $ I shortened that and did a call vertical about $15 wide. I bought the 190 call, sold the 205 call. Like I said, both in the October 30th expiration that was trading about $5.30, trading below $5 now. So the stock is backed off a little more. I up. It's still higher on the day, but it's not as high as it was the overall market has softened. But this is a defined risk strategy. The most you can lose is debit paid. So if you pay 530 it's $530. If you pay something around five, it's $5.e only time you have to rea pay attention is if it were to land in between the strikes, right? Besides that, you're looking for a move to, up to, to $205, where this would be bay a triple something just around three times your money from $5 to 15. But the risk on this, if it were tocontd remember, this is a long vertical call sp We talk about him a lot on this show. Tom, you need a move for this to be profitable. Yeah. Let's break this one down. It's ber 30. I think this is a key on here because you can use the platform to kind of see that they've got earnings on the 28th. So that might be a catalyst to the upside on this. But you've got about 31 days in h call vertical, where he's buying the October 30th weekly options. The 190 call selling the 205trike call bullish $15 wide paying roughly about. We've got 530 debit. As Kevin mentioned, it's probably trading below five bucks right now so you can get a little bit s going to be a risk. So about 530 bucks take break even up to 195 30 to the upside. If you pay 530ebit on that. So on a percentage basis with the stock trading about it's not that big. And you've got 31 days in this positio I think that's key. Risking about one to make an additional two on a trade like this. So the risk reward setup is good. The key is that you need a move to the upside to get into that profitability zone above 195 30 break eventhis one. So pretty straightforward on the bullish call vertical. If you k o higher over the next month. Kevin I used strategy that we don't typically talk about here. But it gives me a nice wide range. It's slightly bearish but you don't want it to go down too far. So this is kind of a you know, maybe a neutral to slightly bearish type of trade. I looked at a straight condor. It's all put where I went out to the October 16th monthly option. So 17 days to expiration. Bought one of the 190 that's in the money just slightly sold one of the 185 sold one of the 180 strike puts and then bought one of the 175 strike puts. So $5 wide bearish Condor paying roughly about a buc 35 debit. That's where it was trading earlier. You might be paying a dime high that. But if you pay that's your ris $135 perde spread with your break evens at 18865. You want it below there and then above 17635. So you've got that rge. It's almos like, you know, a short iron condor, but at the same time it's just a condor all on the put side. Kevin looking for profitability between those short strikes of 180 and 185. But you got a nice wide range Kev and a pretty decent risk reward set up on this with your only risk in about $135 per spread. Yeah, a put condor is not the same as an iron condor. Yours. An iron condor is to short spreads your condor. Your put condor a long spread and a short spread more similar to a butterfly than really a short irondor,se your long one short another, but you're giving yourself a ran, and that range between 185 and 180 on the downside is where this would max out. It's, you know, the debit paid is the risk on there. So just be careful of land in between the strikes. But Tom this is a bearish play that looks for a move in between that 185 and 180 strike. Yep. And it'll start to expand in price as you get closer to expiration. Almost like a butterfly that Kevin justmentioe you go Nicole. Slightly bearish Condor