Pre-Earnings Skepticism Builds On Carnival Corporation (CCL)

Carnival Corporation will unveil its fourth-quarter earnings report ahead of Friday's open

by Karee Venema

Published on Dec 17, 2014 at 10:22 AM
Updated on Apr 20, 2015 at 5:09 PM

Carnival Corporation (NYSE:CCL) will take its turn in the earnings spotlight ahead of Friday's open, and option traders have been banking on a negative reaction to the company's quarterly report. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), for example, CCL's 10-day put/call volume ratio of 1.09 ranks in the 72nd annual percentile. Simply stated, puts have been bought to open over calls at a faster-than-usual clip in recent weeks.

It was a trend witnessed yesterday, with puts crossing the tape at 3.6 times the average daily rate -- and outpacing calls by a nearly 2-to-1 margin. Buy-to-open activity was detected at CCL's December 43 put, where 4,104 contracts were traded. By initiating these long puts, speculators expect the stock to be sitting south of the strike at week's end, when front-month options expire.

Tuesday's options bears were dealt a blow today, though, with the stock up 2.6% at $44.26, following a price-target hike to $50 from $46 -- and a reiterated "positive" rating -- at Susquehanna, and a new "buy" recommendation and $60 price target from Buckingham. This positive price action only echoes the equity's recent trajectory, with Carnival Corporation (NYSE:CCL) rallying 34% from its mid-October annual low of $33.11, thanks to a lift from its 20-day moving average. Should the shares fail to finish the week below $43, though, the most yesterday's put buyers stand to lose is the initial premium paid.

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