Bearish Carnival Corp (CCL) option traders who opened downside positions on Friday are making quick gains today.
Last Friday morning on May. 1, our Unusual Activity Tracking systems found that 4,400 Weekly $13 puts expiring this Friday, May. 8, were bought for $0.35 to $0.45 with shares at $14.77. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 1,502 contracts.
Those puts traded for as much as $0.95 today, at 2 times their purchase prices. The stock declined 13.47% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.
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.
CCL opened to trade as low as $12.75 before pulling back higher with the broader market and ended the session higher by 2.94% at $14.34. The House Committee on Transportation and Infrastructure requested COVID-19 outbreak information from the cruise line operator on Friday.