Bearish Carnival Corp (CCL) option traders who opened downside positions back in May are making big profits today.
On May 19, Market Rebellion’s Unusual Activity Service flagged the purchase of 10,000 October $10 puts for $0.99 to $1.00 with shares at $13.82. This was clearly a new position, as open interest in the strike was a just 4,395 contracts before that session began.
Those puts traded for $3.00 today, about 3 times their purchase prices. The stock declined 49.13% in the same time frame, underscoring 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.
CCL was last down 21.48% at $7.20 today.