Affordable Call Option More Than Doubled Bulls' Money

Unpacking the reasoning behind this winning bullish bet

Digital Content Manager
Aug 15, 2023 at 3:32 PM
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Subscribers to Schaeffer's Options Under $5 service recently scored a 117% profit with our recommended Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) September 14 call. Below, let's unpack the reasoning behind this bet, and how it ultimately played out.

When we recommended this trade on May 30, the cruise stock was sporting an 18% year-to-date lead, and had taken out both its 100- and 200-day moving averages. The security had seen an 800% jump since the Covid-19 pandemic, and shorts had not yet recovered, while short interest still made up a considerable 10% of NCLH's available float.

An elevated Schaeffer's put/call open interest ratio (SOIR) of 1.16 indicated short-term options traders leaned bearish towards the security. It was also an opportune time to buy premiums, as NCLH's Schaeffer's Volatility Index (SVI) sat higher than just 6% of annual readings, meaning volatility expectations were low at that time.

Our subscribers partially closed their positions on June 12, and fully exited them on August 9. This allowed them to profit off Norwegian Cruise stock's rally to a July 11, one-year high of $22.68, and more than double their money in just a couple of months.

NCLH 100 200 Day 2

 

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