Option premiums look attractive on the stock
Cruise line Carnival Corp (NYSE:CCL) has been wildly underperforming on the charts. The stock has shed 22% over the past 12 months, and is continuing to see pressure from its historically bearish declining 40-day moving average. With a large block of puts expiring this week at the underfoot 45 strike, removing a potential layer of options-related support, now seems to be an opportune time to jump onto CCL’s next leg lower.
Short interest has been on the rise since mid-April on Carnival stock, while the shares have simultaneously slid around 15%. This negative price action could embolden more shorts to pile on, and the resulting selling pressure could be a hindrance for CCL.
There is still room for downgrades and price-target cuts on the equity. Specifically, five covering analysts still sport a "strong buy" recommendation, while the stock’s average 12-month price target sits at a lofty $55.94.
Finally, option premiums look attractive on CCL at the moment, based on its Schaeffer’s Volatility Index (SVI) of 24%, which ranks in the 25th percentile of its annual range. Our recommended put has a leverage ratio of negative 5.7, and will double in value on a 14.7% decline in the underlying security.
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