A BusinessWeek report this morning suggests that United Airlines parent UAL Corp. is ready and willing to merge with another airline. Delta Air Lines has denied it's in talks with UAL though the company wasted no time, in any event, establishing a special board committee to research such alternatives. (Industry insiders suggest that a Delta-Northwest Airlines [NWA] merger might be the likeliest outcome.) According to BusinessWeek, United CEO Glenn F. Tilton is exploring asset sales that would lower United's debt and make it a more attractive partner.

Despite the fact that no clear partner has emerged, UAUA shares are up more than 2% today, as is the broader AMEX Airline Index (XAL). Option traders have responded enthusiastically to merger rumors, and the stock's Schaeffer's put/call open interest ratio is now at 0.64, which ranks higher than just 35% of other such readings taken during the past 52 weeks. Peak call open interest of 20,649 contracts lies at the deep-out-of-the-money December 50 strike.

Keep an eye on UAUA's 10-day moving average this short-term trendline has stifled the stock's most recent rally attempts, and the equity's rally met its intraday demise after approaching this resistance level.