Shares of luxury liner operation Royal Caribbean Cruises (RCL) are down about 58 percent in the past year. One trader is betting that the stock will further decline in the coming months.
That’s based on the September $20 puts. With 77 days until expiration, 19,174 contracts traded compared to a prior open interest of 213, for a 90-fold rise in volume on the trade. The buyer of the puts paid $0.87 to make the bearish bet.
The stock last traded for about $36, so shares would need to drop about $16 for the option to move in-the-money. Shares have a 52-week low near $34, so that would represent a much further drop for the stock.
While cruise bookings have moved back towards pre-pandemic highs, they’re not there yet. Plus, high fuel costs right now are also a factor that could impact profitability in the coming months.
Action to take: Investors should avoid shares now, and potentially look to sell and take loss if they’re still holding during this massive pullback in shares. Those looking to buy should look for signs that energy prices are trending down overall, or that the stock market is ready to move higher.
For traders, the puts are well suited for the coming months. Traders can likely nab mid double-digit gains on the trade. But given how far the stock would have to fall for the option to move in-the-money, traders should look for a quick profit on the trade 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.