Experience Trading
on the Go
on the Go
Reading time: 11 minutes
Founded in 1971, Southwest Airlines Co. (Ticker: LUV) is a well-known and popular passenger airline, offering transportation across the US and surrounding international markets. These include over 120 destinations in more than 40 states, the District of Columbia, the Commonwealth of Puerto Rico, and ten near-international countries, including Mexico, Jamaica, The Bahamas, and Aruba.
As of the end of 2023, Southwest Airlines had 817 Boeing 737 aircraft in its fleet. With a market value of nearly US$17 billion, Southwest Airlines remains a household name in the US. It delivers flexible policies – such as no fees for changing flights or cancellations in many cases – outstanding customer service, and an extensive route network.
Although still in their relative infancy, CFDs, or ‘Contract for Differences’, are widely used for speculative and hedging purposes. They are popular for their cost-effective approach, available leverage, and ease of use.
Share CFDs on Southwest Airlines operate similarly to other CFDs, whether in the foreign exchange markets (Forex market), Stock Indexes, Commodities, Bonds, or Exchange-Traded Funds (ETFs). CFDs are formed based on agreements between two parties – the buyer and seller – of a trade. At the end of a trade, the difference between the opening price and the closing price is exchanged between said parties.
Trading CFDs also allows investors to take a position without the need for ownership. CFD investors essentially speculate (or hedge) on the price movement of the underlying share price, permitting long (buy) and short (sell) positions. This is facilitated by CFDs deriving their price based on the performance of the underlying stock price; hence, CFDs are derivatives.
CFDs are also widely known for leverage, which is one of the primary reasons for their wide use among traders and investors. To help explain, Southwest Airlines currently trades at US$28.15; to purchase 200 shares of the company would cost US$5,630. In addition, there would be commissions to factor in. Using margin, an investor can invest in Southwest Airlines using a smaller initial investment while trading an equivalent position size of 200 shares. With FP Markets, you can invest in Southwest Airlines Share CFDs with a 20% margin requirement. As a result, your ‘initial margin’ to open an equivalent position of 200 shares with FP Markets would be US$1,126 (5,630 * 0.2).
1. Open an FP Markets Forex and CFD Trading Account
If you have not already, the first step to trading Share CFDs with FP Markets involves opening a Forex and CFD trading account. Visit the FP Markets webpage https://www.fpmarkets.com and click ‘OPEN LIVE’; this will take you to the Account Application page, a simple five-step process, as shown below.
2. Download your Trading Platform
After your trading account is approved, your login credentials will be sent to your registered email address. These details can be used to access the FP Markets Client Portal, an extensive space designed to allow the trader and investor to take control, from updating personal information to exploring Social Trading options and downloading your preferred trading platform.
FP Markets offers several trading platforms, including MetaTrader 4 (MT4), MetaTrader 5 (MT5), cTrader, and TradingView, as exhibited below. This article assumes you will be trading with MT5.
3. Find the Southwest Airlines Ticker
To locate Southwest Airlines' ticker in MT4 and MT5, you must open your Market Watch (Ctrl+M).
The Market Watch’s interface will present a list of tradeable products with FP Markets. Type Southwest Airlines in the ‘click to add’ tab and select the stock, as demonstrated below.
Following this, drag and drop the stock to the chart’s interface on the right. This will then open a live, real-time chart for Southwest Airlines, assuming the market is open. Once the chart is loaded, you can alter its properties to suit your trading preferences. This may include organising chart types, background colour, applying technical indicators and drawing tools, etc.
4. Place the Buy or Sell Order
One of the most popular and straightforward ways of opening the order window in MT5 is by pressing F9, Ensuring that the symbol reflects the stock of interest (Southwest Airlines). As pictured below, you can input your trade specifics, such as trading volume and your Stop-Loss value, and then press the buy or sell button, depending on what your research suggests.
Although primarily used among short-term traders – think scalping and day trading – you can activate the ‘One-Click Trading’ function in MT5. This feature allows traders to enter the market with a ‘single click’ (assuming trading volume is set). It is important to note, however, that in order to employ Stop-Loss and Take-Profit values, you can configure this after the trade is live through your trading terminal (Ctrl+T).
Here are two examples of long and short positions using Share CFDs:
The company’s second-quarter earnings for 2024, released on 25 July, showed Q2 24 revenue hit an all-time quarterly record of US$7.35 billion, above consensus of US$7.32 billion and marking a +4.5% gain compared to the same period in the previous year (Q2 23). The increase was due to record passenger traffic and ancillary revenue. However, unit revenue fell by -3.8% in Q2 24 compared to Q2 23, influenced by growth outpacing demand. Q3 24 unit revenue is expected to be between flat and -2.0% on a year-on-year basis.
The company’s earnings per share (EPS) was US$0.58 versus US$0.51 expected.
Capacity for Q3 24 was a key focus for investors, and according to the company’s guidance, it will be up +2.0% versus Q3 23 and down -4.0% in Q4 24 compared to Q4 23. The drop is something many in the industry have been expecting.
However, the big news from Southwest Airlines was that they are changing course. Altering its 50-year history, the company has started to offer assigned seating, which more than 80% of customers prefer. In addition, premium flying will be introduced, involving extra legroom, and redeye flights will be available in early 2025.
President, Chief Executive Officer, & Vice Chairman of the Board of Directors, Bob Jordan, commented: ‘Our second quarter performance was impacted by both external and internal factors and fell short of what we believe we are capable of delivering’. Jordan added: ‘We are taking urgent and deliberate steps to mitigate near-term revenue challenges and implement longer-term transformational initiatives that are designed to drive meaningful top and bottom-line growth. […] Our implementation of assigned and premium seating is part of an ongoing and comprehensive upgrade to the Customer Experience, one that research shows Customers overwhelmingly prefer. With record numbers of Passengers choosing Southwest Airlines and work underway to address the challenges we face, we are excited about what the future holds’.
As seen from Southwest Airlines' monthly chart, support is active between US$21.94 and US$23.31. Although this support boasts a significant history, the rebound from the zone in late 2023 is questionable. Price was unable to form a meaningful high and breach previous lower highs. Additionally, in light of the downward pressure this year (down -0.8% year to date), this places a bold question mark on the support’s depth going forward. Were a break lower to unfold, another possible layer of long-term support is visible between US$17.02 and US$18.19.
On the daily timeframe, price action rallied through the 200-day simple moving average (SMA) at US$28.46 on Tuesday. This dynamic value has offered investors clear resistance and support this year, therefore the break is noteworthy and something many will likely take on board.
Based on this analysis, the dominant break north of the 200-day SMA indicates the monthly support may hold up, and buyers may look to defend their current position and push higher into the year-end. It will be interesting to see how the stock fares at tops around US$30.00 (marked ‘resistance area’).
Investing in the company's physical shares is an option for investors who prefer to become a partial owner of Southwest Airlines. Ownership will be proportionate to the number of shares purchased.
Buying shares in a company bestows voting rights at the company’s annual meeting, dividend income through regular dividend payouts (assuming the company pays dividends), and capital gains if the company's share price appreciates.
Futures and options are another alternative to investing in Southwest Airlines. Both are leveraged derivative products (deriving their value based on an underlying asset – in this case, Southwest Airlines’s share price). At a fundamental level, two parties enter an agreement to buy and sell the underlying asset at an agreed price in the future.
However, it is important to note that futures and options slightly differ. In a futures contract, both parties are obligated to buy and sell, while in an options contract, the contract holder has the right but no obligation to buy and sell the underlying asset.
ETFs offer an additional form of investment. With that being said, ETFs are exchange-traded funds that trade similarly to stocks and often track an underlying index. Therefore, investing in ETFs will not mirror the share price of Southwest Airlines tick for tick.
1. Does Southwest Airlines pay a dividend?
Yes, Southwest Airlines does pay dividends; the company’s annual dividend yield is 2.55%.
2. What are the major differences between CFDs and physical shares?
CFDs and physical shares differ in a number of ways. The former represents derivative products, while the latter reflects ownership of the company. Leverage is another noteworthy difference. CFDs also afford investors a greater range of leverage compared to physical shares.
3. Can I trade Southwest Airlines on MT4 or MT5?
With FP Markets, you can trade Southwest Airlines via CFD pricing on MT5 and cTrader.
Access 10,000+ financial instruments Auto open & close positions News & economic calendar Technical indicators & charts Many more tools included
By supplying your email you agree to FP Markets privacy policy and receive future marketing materials from FP Markets. You can unsubscribe at any time.
Source - cache | Page ID - 41026
