Andrea Kramer (akramer@sir-inc.com) Royal Caribbean Cruises Ltd. (RCL) has been a favorite target among the options crowd today, with intraday volume already surpassing the stock's expected single-session activity. More specifically, the cruise concern has seen roughly 6,300 puts and 6,100 calls cross the tape, compared to its predicted daily volume of about 2,700 puts and 1,700 calls. However, digging deeper into the data reveals that most of the activity is related in what appears to be an anti-volatility play.
Earlier today, the at-the-money January 40 strike saw about 5,500 calls and 5,500 puts change hands, with all of the blocks marked "spread." The calls traded for the bid price of $2.96, while the puts were exchanged for the bid price of $2.59, indicating that the trader constructed a short straddle on RCL for a net credit of $5.55 per pair of options.
By writing to open the 40-strike options, the investor is hoping the shares of RCL will finish right at the $40 level when January-dated options expire. In this best-case scenario, all of the options will expire worthless, allowing the strategist to retain the entire premium received at initiation. However, as long as the security settles between the $34.45 level (strike minus net credit) and the $45.55 level (strike plus net credit), the trader will bank a profit on the play.
At last check, the shares of RCL have fallen in parity with the broader equities market, giving up 2.7% to linger in the $40.50 neighborhood.
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