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Options Bulls Blast NCHL Despite Dismal Quarterly Report

The security has added more than 88% over the past nine months

Digital Content Manager
Feb 25, 2021 at 10:37 AM
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The shares of Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) are down 4% at $30.05 this morning, after the travel name reported worse-than-expected fourth-quarter losses. The cruise line is still suffering from the impacts of the pandemic, which brought on a roughly year-long sailing hiatus imposed by the U.S. Centers for Disease Control and Prevention (CDC). However, Norwegian Cruise Line noted bookings are looking stronger for 2022, as more people look forward to vacations after getting a Covid-19 vaccine.

Digging deeper, the security has been slowly but surely distancing itself from a March 18, all-time low of $7.03. Norwegian stock has more than quadrupled from that bottom, and earlier today broke through overhead pressure at the $32 mark to reach its highest level in almost a year. What's more, shares have been getting support from the 80-day moving average since November, and NCLH has added more than 88% over the past nine months.

Analysts are still mostly bearish towards the security, with nine of the 13 in question carrying a tepid "hold" or worse rating, while four say "strong buy." Plus, the 12-month consensus target price of $23.58 is a 22.1% discount to the stock's current levels.

Meanwhile, short sellers have started to hit the exits. Short interest is down 8.5% during the last two reporting periods, but the 42.94 million shares sold short still make up 19.9% of NCHL's available float.

The options pits lean far more optimistic, with an appetite for calls. This is per the stock's 50-day call/put volume ratio of 4.27 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), which stands higher than 94% of readings from the past year. In other words, calls are being picked up at a faster clip than usual.

Drilling down to today's options activity, 34,000 calls have crossed the tape so far, which is three times the intraday average, and more than double the 12,000 puts traded. Most popular is the monthly June 32.50 call, followed by the weekly 3/5 31-strike call, with new positions being opened at the latter.

Now seems like an opportune time to weigh in on NCHL's next move with options. The security's Schaeffer's Volatility Index (SVI) of 88% stands in the low 14th percentile of its annual range, suggesting the equity sports attractively priced premiums at the moment.


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