Put Traders Pound RCL, CCL Stocks Amid Harvey, Irma Fallout – Schaeffers Research (blog)

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Like the broader travel sector, cruise stocks have come under pressure in recent weeks due to the fallout surrounding Hurricane Harvey and now Hurricane Irma. In yesterday’s session, Royal Caribbean Cruises Ltd (NYSE:RCL) fell 4.2%, and Carnival Corp (NYSE:CCL) shed 3.1%. Meanwhile, options activity has been accelerated, with traders predicting extended weakness for shares of RCL and CCL. 

Put Traders Target $105 Level for RCL Stock

Put volume for Royal Caribbean Cruises closed at four times the expected pace yesterday, touching a 52-week high in the process with 7,723 contracts exchanged. The most popular options by far were the 105 and 115 puts in the September and October series. It’s possible a number of bearish spreads were initiated using these contracts, which could indicate traders are anticipating RCL stock moving as low as $105 in the coming weeks. 

Puts are trading at an accelerated clip today, too, though this is part of a larger trend. According to data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Royal Caribbean has a 10-day put/call volume ratio of 2.47 across these exchanges, good enough to rank in the top quartile of its annual range. 

Some of this put buying could be shareholders hedging, however, since the stock has had such an excellent run on the charts. Year-over-year, the equity is up 70.6% at $117.83, and it touched a record high of $125 last Friday. But there’s definitely some pessimism building on the Street, since short interest increased 42.3% in the last reporting period. 

Chart Support Could Check CCL Put Buyers

Carnival also experienced unusual put trading yesterday. In fact, put volume ended at 14 times the expected rate, with the September 67.50 strike leading the way. Data points to buy-to-open activity here, meaning traders are betting on CCL shares falling below $67.50 by the close on Friday, Sept. 15, when the contracts expire. 

In today’s trading, put volume is running at nine times the norm, and most of the action has taken place at the September 66.50 put. It seems safe to assume new positions are being purchased here, pointing to more ambitious options bears. 

Overall, the security has a 10-day put/call volume ratio of 2.92 across the ISE, CBOE, and PHLX. Not only does this show put buying has nearly tripled call buying in the last two weeks, but it ranks just 5 percentage points from an annual bearish extreme. 

But even with these recent losses, CCL remains up 45% year-over-year at $66.60, just a few points removed from its Sept. 1 record high of $69.89. And the shares seem to be finding support in the form of their 80-day moving average, a trendline they haven’t breached on a closing basis since last October. 

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