Carnival Stock Careening Lower After Public Share Offering

Calls have been overwhelmingly popular in the options pits

Assistant Editor
Feb 23, 2021 at 10:53 AM
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It's no secret that cruise line Carnival Corporation (NYSE:CCL) has had a rough go over the past year, with vacations halted due to the coronavirus pandemic. In an effort to generate profits that will be used for general corporate purposes, the travel company just announced a public share offering of $1 billion shares of its common stock. In response, CCL is down 4.1% at $24.92 at last check.

Today's drop has the stock pulling back from yesterday's rally, which culminated in a roughly annual high of $27.33. The security has traded sideways for much of the past year, as shares struggled with overhead pressure at the $26 mark. Year-to-date, CCL remains up 15.6%. 

Meanwhile, analysts are pessimistic on Carnival stock, with 10 of the 12 in coverage carrying a tepid "hold" or worse rating. Plus, the 12-month consensus price target of $18.52 is a 25.8% discount to current levels. Short sellers are building their positions, too. Short interest is up 29.7% in the last two reporting periods, and the 70.10 million shares sold short make up 13.3% of the stock's available float.

The options pits are far more bullish, however. At the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), 3.57 calls have been bought for every put over the past 10 days. This ratio stands higher than all other readings from the past year, meaning long calls are being picked up at a much faster rate than usual. 

These premiums are reasonably priced at the moment, too, per the stock's Schaeffer's Volatility Index (SVI) of 87%, which sits in the 16th percentile of readings from the past year. This implies that options players are currently pricing in relatively low volatility expectations.

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