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Pre-Earnings Option Bulls Set Sail for Royal Caribbean Cruises

RCL call buyers are shrugging off a price-target cut

by 1/31/2012 1:47 PM
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Despite a price-target cut to $30 from $38 at Barclays, Royal Caribbean Cruises Ltd. (RCL - 27.14) is attracting call traders today, as speculators roll the dice ahead of the firm's turn in the earnings limelight on Thursday. In afternoon trading, RCL has seen more than 4,500 calls change hands -- nearly double its average single-session call volume, and more than 12 times the number of RCL puts exchanged.

Garnering the most attention has been the near-the-money February 26 call, which has seen more than 2,800 contracts traded on open interest of fewer than 2,300, pointing to an influx of new positions. What's more, 99% of the front-month calls have crossed the tape at the ask price, hinting at buyer-oriented activity. By purchasing the calls to open, the buyers are betting on RCL to muscle north of the $26 level over the next few weeks.

From a broader sentiment standpoint, however, today's preference for calls runs somewhat counter to the growing trend seen on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), where RCL has racked up a 10-day put/call volume ratio of 1.40. In fact, this ratio registers in the 62nd percentile of its annual range, implying that option buyers have scooped up RCL puts over calls at a slightly accelerated clip during the past couple of weeks.

At last check, RCL has backpedaled 0.2% to linger in the $27.14 area. From an historical standpoint, the company has fallen short of Wall Street's bottom-line earnings projections in two of the past four quarters, Thomson Reuters reports.


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