Boeing's production disruptions and certification delays hurt free cash flow; stock is difficult despite orders.

Boeing's stock is rising today despite a Bloomberg report that the Federal Aviation Administration may delay certification of the 737 Max 10. The stock had fallen by approximately 7% yesterday after news spread of a software glitch that could affect trading.

We've talked a lot about Boeing over the past 24 hours, Kevin, and now I want to hear your take on the stock and how it's behaving in light of the latest news.

Yes, Boeing's stock saw a slight recovery today after a sharp decline yesterday. This is mainly due to a statement from the Federal Aviation Administration, which said: "Aircraft flying today are safe, and the malfunction does not affect aircraft control."

This, in my opinion, is a key part of the issue. Yes, this is a problem that emerged through General Electric Aerospace, and the Federal Aviation Administration has delayed the certification of the 737 Max, but many analysts and experts are talking about it and discussing that it may only take a few weeks to clean up the software and be re-certified or get back on track.

So, it's not good news. There is no doubt about it: if you are an investor in Boeing, this is not what you are looking for in the news. While this company is trying hard to return to profitability and recover by selling and delivering aircraft, and improving its balance sheet and cash flows, this is not what you wanted to hear from Boeing yesterday.

So, there is some relief that it may not be as bad as initially thought, but it is certainly not good, Nicole and Tom. It's a difficult name, because it's a great American company that people love and that our national security depends on, but it's one of those companies that is very affected by headlines.

Day after day, year after year, we've been working on this for many years, and many headlines have affected its stock price, but it reached its highest point at 254, and it's now at 188.

Tom, what do you think of Boeing? Yes, as you know, I think there are more disruptions to production, and I think that will be a decisive factor. They are trying to reach their target of producing 47 aircraft per month, but they are not currently achieving it.

So, these disruptions negatively affect their expectations for free cash flow, don't they? They recently gave an update at an industry conference, stating that their free cash flow is still between $1 billion and $3 billion for this fiscal year.

The company is unlikely to achieve $2 billion, it has stated, given these disruptions, whether related to the certification of the 737 Max or the 787 Dreamliner with some of its engines grounded.

But the company has seven years' worth of unfulfilled aircraft orders, valued at nearly $715 billion.

So, yes, they have the orders, don't they? All they need is to improve execution, but that's Boeing's problem; they sometimes stumble, and as you know, look at some of the comments.

but look at their recent orders. Turkish Airlines has ordered 150 aircraft, and Korean Air has announced orders for 103 aircraft. Then we look at Oksana Airlines, the Indian airline.

They have outstanding orders for 183 Boeing Max aircraft, and may order another 200.

There was a condition that China would order more than the 200 aircraft they had previously announced with the administration, but that did not happen during the president's visit.

This may put pressure on the stock price, which yesterday reached its lowest level in almost ten months.

Therefore, I believe that investors are still trying to understand the situation, and they need to increase production and free cash flow to achieve their goal of $10 billion over the next two years.

They continue to operate in accordance with all standards, and the Federal Aviation Administration is working closely to try to resolve the issue. Remember the door problem they encountered.

They faced many problems, but they overcame them thanks to new leadership and so on.

If you believe this stock is a good buy when its price is low, and you have a positive long-term outlook on Boeing, then you can consider a deal like this.

As I mentioned, if this is a trial deal that ends on October 30, that gives you a full month to get through these problems. If you think it will take longer, you can extend this date, but I looked at the projected movement up to October 30, and it was around $17.

I shortened this range and sold a vertical buy option with an offer of approximately $15. I bought the call option at 190, and I sold the call option at 205.

As I mentioned, both expire on October 30th. The stock was priced at around $5.30, and is now trading at less than $5. Therefore, the stock declined slightly. The price has risen, and is still higher today, but not as high as before due to the overall market decline; however, this is a specific risk strategy.

The maximum possible loss is the amount paid. If you pay 530, the loss will be $530. If you pay around $5, the loss will be a maximum of $5. The only real risk, and the only time you should pay attention, is if the price falls between the two strike prices, right?

In addition, you are expecting a rise to $205, which would be almost three times your capital, i.e., from $5 to $15. However, the risk lies in the continued decline, and remember that this is a long vertical buying strategy.

Let's analyze this strategy. These are monthly options with a date of October 30th. I think this is a key factor here, as you can use a platform to find out that the company will announce its earnings on the 28th of the month.

This may be an incentive for a price increase, but you have about 31 days in Kevin's bullish strategy, where he buys the weekly call option for October 30, at a price of 190, and sells the call option at a price of 205, within a price range of $15, and pays about $530 as a credit value, as Kevin stated.

The stock price is likely to be less than five dollars right now, so you can get a slightly cheaper price. But paying Kevin's creditor would be risky. Therefore, paying $530 would raise the breakeven point to $195.30 if a credit value of $530 is paid.

So, as a percentage, and with the stock trading at around $188, the amount isn't huge, and you have 31 days in this deal. I think this is the basis. Risking one to achieve an additional profit of two in a deal like this.

Therefore, the risk-to-reward ratio is good. The secret is that you need an upward move to reach the profitability zone above 195.30, which is the breakeven point for this trade.

So, it's quite clear in the vertical bullish buying strategy if you believe this stock will rise over the next month.

Kevin, I used a strategy that we don't usually talk about here, but it gives me a good wide range. It's a somewhat bearish strategy, but you don't want the price to fall too much.

So, these are sort of trades that are neutral to slightly bearish. I looked directly at the Condor strategy. All of them are put options. I chose a monthly option on October 16, which is 17 days until the expiry date.

I bought one of the put options at 190, which is slightly profitable. I sold one put option at 185, I sold one put option at 180, and then I bought one put option at 175.

So, a $5 wide bearish condor strategy pays out about $1.35 as a discount. This is the previous trading price. You may pay an extra 10 cents for that. However, if you pay $1.35 as a discount for this deal, that's your risk.

$1.35 per spread with the breakeven point at 188.65. You want the price to be lower than that, then higher than 176.35. So, you have this range. It's more like a short iron condor strategy, but at the same time it's just a condor strategy on the sell options side, Kevin.

I'm looking for maximum profitability between short execution prices of 180 and 185, but you have a great wide range, Kevin. This is a good setup in terms of risk-to-reward ratio, as you risk only about $135 per option.

Yes, the "Selling Condor" strategy is different from the "Iron Condor" strategy. The "Iron Condor" strategy consists of two short options. The "selling condor" strategy is a long option and a short option.

It is closer to the “butterfly” strategy than to the short “iron condor” strategy, because you buy one and sell the other, but you set a price range for yourself, and this range between 180 and 185 is the maximum profit.

As you know, the amount paid is the risk, so be careful about entering between the two execution prices. This is a bearish strategy looking for a price movement between 180 and 185.

Yes, the price will start to rise as you get closer to the expiration date, just like the "butterfly" strategy that Kevin mentioned. So, this is Nicole's slightly bearish "Condor" strategy, and Kevin's bullish "vertical option" strategy at Boeing.