Bearish Carnival Corp (CCL) option traders who opened downside positions on Thursday are making gains today.
Last Thursday on Jul. 1, our Unusual Activity Tracking systems found that 4,250 Weekly $15.50 puts expiring tomorrow, Jul. 10, were bought for $0.68 as part of a bearish combo, selling an equivalent number of upside calls, with shares at $15.94. This was clearly fresh buying, as volume was well above the strike’s existing open interest of 875 contracts.
Those puts traded for as much as $1.21 today, nearly 2 times their purchase prices. The stock declined 8.97% 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 higher this morning but ended the session lower by 4.83% at $14.58. The cruise line operator announced this morning that it will restart sailing vacations in August.