Shares of Carnival Corporation (CCL) have lost 60 percent of their value in the past year. One trader sees the potential for a further decline in the coming weeks.
That’s based on the November $9 put. With 46 days until expiration, 5,155 contracts traded compared to a prior open interest of 127, for a 41-fold rise in volume on the trade. The buyer of the puts paid $1.11 to make the downside bet on the company.
Shares recently traded right around $7.50, making this trade in-the-money. Carnival shares just broke through a 52-week low of $8.10 on Friday.
The company’s financials show the strength it had last year, as the cruise line business reopened after the pandemic. Revenue soared 4,800 percent, although the company failed to make a profit.
However, with the economy slowing and with fuel prices substantially up this year, it’s unlikely that Carnival will become profitable anytime soon. That suggests a further downside to shares.
Action to take: Shares will likely continue to trend down, so interested investors should hold off on buying shares here. The stock will likely go even lower from there, having failed to hold its 52-week lows.
For traders, the November puts have a short amount of time to play out, but with the market breaking to new lows right now, they’re well-positioned to profit from the current trend. The option can likely deliver mid-double-digit returns in the coming weeks.
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.