$NCLH bears cruise with profits

Shares of Norwegian Cruise Line (NCLH) sank lower today, delivering a wave of profits to downside option positions opened less than 24 hours before.

Just yesterday afternoon on Mar. 26, our Unusual Activity Tracking systems found that 4,000 Weekly $15 puts expiring today, Mar. 27 were bought for $0.45 to $1.10 with shares at $16.70. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 405 contracts.

Today those puts have traded for $2.95, more than 3.5 times their average price. The stock fell 27.84% in the same time, showing how options can far outperform their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

NCLH drifted lower to $12.04 earlier this session and was last trading at $13.03, down 17.01% on the session. The cruise-line operator gapped lower this morning after a Wall Street Journal report detailed that the cruise-ship industry would not qualify for the roughly $2 trillion coronavirus stimulus package.