Leverage Alert: Delta Air

LEVERAGE SERVICES
WEDNESDAY, JANUARY 5, 2005
COMMENTARY

DELTA AIR LINES (DAL) TRADE DRIVERS:

* Despite DAL's pullback today on news that it was slashing its fares for
the continental U.S., the shares are holding at support in the 6.50 area.
This region held for the equity during its pullback in November, allowing
the shares to rebound sharply in the ensuing weeks.

* Lending additional credence to support within the airline industry, the
AMEX Airline Index's (XAL) pullback in today's session is also holding at
support encountered in November. Mirroring DAL's performance for the time
frame, the XAL also rebounded nicely during the following weeks.

* Short interest for DAL currently accounts for more than 39 percent of the
stock's total float. What's more, it would also take nearly eight days for
short sellers to buy back this plethora of bearish bets, potentially
lending strength to a snapback rally from the shares in the form of short
covering.

* Options players have also placed heavy bets against the security, as the
stock's Schaeffer's put/call open interest ratio of 1.12 indicates that
puts outnumber calls in the front three months of options. This pessimism
indicates that options players don’t believe DAL will rally much higher,
removing potential options-related resistance from the security’s path.

* What's more, Wall Street has its doubts, as Zacks reports that eight of
the 10 covering analysts rate the shares a "hold." Any upgrades could add
further lift for DAL.

* One concern for this trade would be a continued downtrend in the airline
sector and the overall market.

REVIEW OF RECOMMENDATION: Buy the Delta Air Lines January 2005 5.00 call
(DALAA) at a maximum entry price of 1.60. We will closely monitor this
position and contact you immediately with updated instructions should our
expectations change.

You will not receive further communication concerning this trade, including
closeout instructions,
if your subscription is not active at the time we issue follow-up
instructions.
Copyright 2005 Schaeffer’s Investment Research Inc.