Shares of Carnival Cruise Lines (CCL) have been trading in a range over the past year. One trader sees shares, near the low end of their range right now, heading higher in the next few weeks.
That’s based on the May 6th $18.50 calls. With 24 days until expiration, 15,210 contracts traded compared to an open interest of 122, for a 125-fold surge in volume on the trade. The buyer of the calls paid $1.10 to get into the trade.
The stock last traded just over $18 per share, to the option is already an at-the-money trade.
The cruise line shares are down about 34 percent since a year ago, but have been bouncing between the teens and low $20 range for months. While revenue growth has increased an astonishing 6,142 percent in the past year on the reopening of the cruise line business, the company is still deeply unprofitable.
Action to take: Shares need a more positive catalyst to move out of their current range-bound behavior. But with the stock at the lower end of its range, it could return 15-20 percent in the coming months before the next move back down. However, investors won’t get a dividend on shares.
For traders, the May calls can likely deliver mid-double-digit gains in the coming weeks before expiration. Traders might even want to buy on a down day and look to flip the options on the next rally in shares to take advantage of the daily volatility in shares.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.