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Royal Caribbean Cruises Sinks on Sector Woes, Attracts Put Players

RCL's front-month puts have garnered notable attention

by 1/17/2012 11:17 AM
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The shares of Royal Caribbean Cruises Ltd. (RCL - 27.70) have followed Carnival Corp. (CCL) into the red this morning, attracting a slew of put players in the process. Already today, RCL has seen roughly 13,000 puts cross the tape -- about five times the number of RCL calls traded, and close to eight times its average daily put volume.

Digging deeper into the data, it appears speculators are establishing new positions at the out-of-the-money January 20, 23, and 25 strikes, where intraday put volume has exceeded open interest. However, while most of the 20-strike puts have traded at the ask price, suggesting they were bought, the bulk of the higher-strike puts have crossed at the bid price, hinting at seller-driven volume. By writing the puts to open, the sellers are expecting RCL to remain north of the respective strikes through the end of next week, when front-month options expire.

From a broader sentiment standpoint, though, today's preference for puts marks a change of pace among RCL options traders. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock sports a 10-day call/put volume ratio of 1.56. What's more, this ratio registers in the 75th percentile of its annual range, implying that options players have bought to open RCL calls over puts at a faster-than-usual clip during the past couple of weeks.

Echoing that sentiment, the security's Schaeffer's put/call open interest ratio (SOIR) of 0.28 sits just two percentage points from a 52-week low. In other words, short-term options traders have rarely been more call-heavy on RCL during the past year.

In early trading, RCL has shed about 3.7% to explore the $27.70 neighborhood. Right out of the gate, analysts at Susquehanna downgraded the stock to "neutral" from "positive." However, there could be plenty more on the way. According to Zacks, RCL has earned seven "buy" or better ratings, compared to five "holds" and not a single "sell" suggestion.


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