Options Trading News

September 24, 2013  Tue 12:16 PM CT

A trader is apparently expecting Royal Caribbean Cruises to capitalize on the woes of a chief competitor.

RCL is down 1.35 percent to $38.85 in afternoon trading, but that is far less than the 7.31 percent drop in arch-rival cruise operator Carnival. CCL fell sharply after reporting weak quarterly numbers and cutting its outlook this morning.

About 3,000 RCL November 42 calls traded in a strong buying pattern in 4 minutes today for $0.51 and $52, according to optionMONSTER's Heat Seeker tracking system. This is clearly a new position, as open interest in the strike was a mere 2 contracts before the trade appeared.

These long calls lock in the purchase price for Royal Caribbean stock for the next two months no matter how far it might climb. They could be sold earlier at a profit before then if premiums gain with rally before then, but the contracts will expire worthless in mid-November if RCL remains below $42. (See our Education section)

Total option volume in the name tops 7,200 contracts today, already more than 5 times its full-session average for the last month. Overall calls outpace puts by nearly 3.5 to 1 so far.
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The covered call and unhedged risk

I have written a few things on the Covered Call Strategy over the last two weeks. Please understand that those two previous articles plus this one do not constitute a proper, fully in-depth lesson on the Covered Call Strategy like we have in our classes at Option Monster Education. I have picked out a few topics that I believe were worth noting and today I am going to add the final one.

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