Option Bears Pile Onto Carnival Corp (CCL) Ahead of Earnings

Carnival Corp (CCL) is surrounded by bearish sentiment ahead of its quarterly earnings report, tentatively scheduled for next week

by Kirra Fedyszyn

Published on Sep 16, 2016 at 3:17 PM
Updated on Jun 24, 2020 at 10:16 AM

Cruise line Carnival Corp (NYSE:CCL) is tentatively scheduled to report quarterly earnings next week. The stock has had a rough year on the charts, dropping 15% so far in 2016, and losing a foothold above a long-term level of support in the form of its 160-day moving average. And with Carnival stock down 0.5% at $46.24 today, options traders are weighing in, with many betting on more losses ahead.

Diving right in, CCL puts are trading at roughly 13 times the expected intraday rate, with nearly 22,000 contracts on the tape, outnumbering calls nearly 4-to-1. The most active option by a mile today is the soon-to-be-front-month October 43 put. This out-of-the-money put appears to be seeing a fair amount of buy-to-open action -- including a block of 9,899 contracts -- meaning speculators are betting on CCL falling below the $43 level over the next five weeks.

It doesn't appear to be the most appealing time to be buying the stock's short-term options, however. The equity's Schaeffer's Volatility Scorecard (SVS) clocks in at just 13. That means the options market has been overpricing the stock's ability to make outsized moves during the past year.

More broadly speaking, today's preference for puts is just an exaggeration of the put-heavy trend seen in CCL's options pits of late. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 50-day put/call volume ratio of 2.36 sits in the 88th percentile of its annual range.

Sentiment outside of the options pits has been rather pessimistic, as well. Short interest, for example, rose by more than 27% during the two most recent reporting periods, and now represents 5.1% of CCL's available float. At the stock's average daily volume, it would take a week to cover all those bearish bets. And analysts' opinions of CCL aren't much better -- just half of the brokerage firms tracking the stock recommend buying the shares.

If past is precedent, however, CCL could catch these skeptics off-guard post-earnings. After all, the stock has made a move to the upside in the session following its earnings report in six of the last eight quarters. On average, though, Carnival Corp (NYSE:CCL) has clocked a single-session post-earnings swing of 2.9% -- regardless of direction -- over this time frame.

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