2 Cruise Stocks to Watch this Week

Options players are disregarding the earnings histories of RCL and NCLH

Nov 6, 2017 at 2:43 PM
facebook X logo linkedin

Later this week, traders will digest third-quarter earnings from cruise lines Royal Caribbean Cruises Ltd (NYSE:RCL) (Tuesday) and Norwegian Cruise Line Holdings Ltd (NASDAQ:NCLH) (Thursday). Here's a closer look at what traders are expecting from the cruise stocks ahead of earnings.

Options Market Prices in Big Earnings Swing for Royal Caribbean Stock

Royal Caribbean stock has surged the charts this year, adding 52.7% and touching a record high of $128.09 on Oct. 13. At last check, the security was trading within a chip shot of this all-time high at $125.34, up 1.7%, after Wells Fargo and Susquehanna raised their price targets earlier this morning to $135 and $144, respectively. RCL shares could climb higher toward these price targets after Tuesday's earnings report, if past is precedent.

Historically, RCL shares have rallied the day after earnings in five of the last eight quarters, with an average post-earnings move of 6.4%, regardless of direction. This time around, the options market is pricing in a bigger-than-average one-day swing of 9%, per at-the-money implied volatility data from Trade-Alert. A jump of this magnitude would send the security up to record highs -- in the $136 neighborhood.

Despite the stock's impressive earnings history and recent price action options traders appear to be bracing for a RCL decline. The security's 10-day put/call volume ratio on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) of 3.96 ranks in the 78th percentile of its annual range. In other words, options players have bought to open puts relative to calls at a faster-than-usual clip during the past two weeks.

Earnings History Isn't on Norwegian Cruise Line Shares' Side...

Although Norwegian Cruise Line stock has climbed roughly 30% in 2017, the shares have struggled to hold onto gains since touching an annual high of $61.48 on Aug. 8. And while the equity was last seen trading 0.6% higher at $55.37, it could sink lower after Friday's earnings report, if past is prologue.

Looking back at the last eight quarters, NCLH shares have moved lower the day after five of the last eight reports, with an average post-earnings move of 6.5%, regardless of direction. For Friday, the options market is pricing in a bigger-than-average one-day swing of 7.5%. A drop of this nature would send the security to the $51 neighborhood.

...But Options Traders Are

Options traders on the ISE, CBOE, and PHLX, however, could be expecting a post-earnings pop, as evidenced by the stock's 10-day call/put volume ratio of 20.76 -- good enough to rank in the 94th annual percentile. This ratio tells us that options players have bought to open more than 20 NCLH calls for every put during the past two weeks.

Echoing this, the security's Schaeffer's put/call open interest ratio (SOIR) stands at 0.21, which ranks lower than 95% of all other readings from the past year, meaning short-term options traders have rarely been more call heavy during the past 12 months.


Target Effortless Triple-Digit Gains Every Sunday Evening For Life!

This is your chance to triple your profit potential on Sunday evenings, without spending all your free time watching the market.

On Sundays, as a Weekend Plus subscriber, you’ll get up to 6 trades every Sunday, each targeting gains of 200% or more.

Start targeting gains like the ones our subscribers have seen recently, including:

213.3% GAIN on AutoNation calls
100.0% GAIN on Monster Beverage calls
100.4% GAIN on Walgreens Boots Alliance puts
100.4% GAIN on ON Semiconductor calls
257.7% GAIN on Dell calls

101.0% GAIN on Apollo Global Management calls
103.6% GAIN on JP Morgan  Chase calls
105.3% GAIN on DraftKings calls
101.3% GAIN on Airbnb calls
203.0% GAIN on Shopify calls
102.0% GAIN on Cboe Global Markets calls
100.9% GAIN on Boeing calls
102.1% GAIN on Microsoft puts
102.3% GAIN on First Solar calls
101.5% GAIN on PulteGroup calls
101.0% GAIN on Apple calls
209.4% GAIN on NXP Semiconductors calls
100.8% GAIN on Uber Technologies calls
100.4% GAIN on Academy Sports and Outdoors puts
102.2% GAIN on Trade Desk calls
100.8% GAIN on DoorDash calls
100.0% GAIN on Camping World Holdings puts
100.0% GAIN on Cboe Global Markets calls
100.2% GAIN on C3.ai calls
238.5% GAIN on Oracle calls



Rainmaker Ads CGI