Carnival Options Traders Doubled Their Money in 2 Weeks

CCL was losing steam near its 200-day trendline

by Patrick Martin

Published on Dec 20, 2018 at 1:48 PM

Subscribers to Schaeffer's Weekly Options Trader service scored a 118% profit with the Carnival Corp (NYSE:CCL) weekly 12/14 62-strike put we recently recommended. We'll take a closer look at why CCL stock appeared on our bearish radar, and how the winning options trade unfolded.

When we entered the position on Friday, Nov. 30, the cruise line stock was getting rejected by its 200-day moving average, a trendline that roughly coincided with its post-earnings bear gap from September. With multiple layers of resistance looming, it seemed like CCL was poised to turn lower once more. 

Surprisingly, analysts were still entrenched in the bullish camp, with nine of the 14 brokerages covering CCL maintaining "strong buy" ratings, and not a single "sell" in sight. A round of downgrades could likely create headwinds for the stock.

In the options pits, there was a large amount of call open interest at the overhead 62.50 and 60 strikes. As long as CCL remained below these call-heavy strikes, this created the potential for selling into expiration as long as positions associated with these calls were unwound.

Plus, near-term implied volatility was relatively low for the weekly 12/14 puts, which expired before Carnival's Dec. 20 earnings date. This indicated our recommended puts were attractively priced.

After our put recommendation, Carnival stock continued to backpedal on the charts. We closed the first half of our position the morning of Monday, Dec. 10, when CCL was trading around $56.45. We closed the final half of the position on Friday, Dec. 14, when CCL fell to $56.33, allowing our subscribers to lock in a 118% profit in roughly two weeks.

CCL stock chart dec 20

 

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