Cruise line operator Carnival Cruise Lines (CCL) has been rangebound for several months after a big drop nearly a year ago. One trader sees shares trending lower in the coming weeks.
That’s based on the May $8.50 puts. With 22 days until expiration, 5,310 contracts traded compared to a prior open interest of 100, for a 53-fold rise in volume on the trade. The buyer of the puts paid $0.31 to make the bearish bet.
Shares recently traded for about $9, so they would need to fall about $0.50, or just under 5 percent, for the option to move in-the-money.
Such a move could continue the current downtrend that’s started over the past few weeks. Shares may even retest their 52-week low of $6.11.
Although revenues have exploded higher by 173 percent in the past year, the company is still losing money. Rapidly fluctuating energy prices and slowing consumer spending are likely to take their toll.
Action to take: Given the company’s current losses and stresses on consumer spending right now, investors interested in the stock should wait for a downswing to play out before buying.
For traders, the May puts are inexpensive and could deliver mid-to-high double-digit returns in just a few weeks. They work well to hedge against the overall market right now, or to play to the current weakness in Carnival 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.