Market Insights

Carnival is the top-performing member of the S&P 500 in June, and one big options trader may think it will keep sailing over the summer.

Check out this unusual options activity yesterday in the cruise-ship operator:

• 20,000 August 16 calls traded for $0.83.
• 20,000 August 20 calls traded for $0.14.
• Volume exceeded open interest in both strikes, which suggests new positions were opened.

The transaction appears to be a vertical call spread, which can profit from a rally with limited cost. Buying calls fixes the price where investors can purchase a security. They can also be sold to generate premium and lower the cost.

Tuesday’s spread would have cost $0.69. It could expand to $4 if CCL closes at or above $20 on expiration. That’s a potential return of 480 percent from a 31 percent move in the underlying shares. (They were quoted at $15.28 at the moment of the trade.)

CCL rose 8.8 percent to $15.88 yesterday and is up 41 percent so far this month. The travel stock lost about 90 percent of its value between early 2018 and early 2020. It hit a 30-year low in October, and has worked steadily higher since on signs of travel demand improving.

The shares jumped to a new 52-week high on June 12 thanks to an upgrade by JPMorgan. The company also reported better-than-expected earnings and revenue on Monday.

Overall option volume was slightly above average in the stock yesterday, according to TradeStation data. Calls accounted for a bullish 75 percent of the total.

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