Range-bound play sees Carnival adrift

By David Russell,

Shutterstock photo

One investor apparently thinks that Carnival is going nowhere in a hurry.

optionMONSTER's tracking systems detected the sale of about 1,600 contracts each in the October 32 puts for $1.35 and the October 34 calls for $0.70 to $0.85. It resulted in a credit of $2.05 to $2.20, which the investor will get to keep if CLL remains between $32 and $34 for the next five weeks.

Known as a straddle , the trade is designed to profit from the passage of time rather than from the stock making a directional move. This is especially suitable now because time decay will accelerate as expiration approaches on Oct. 21.

The strategy will also benefit from lower implied volatility , which would depress the value of the calls and puts sold short. (See our Education section)

CCL is down 4.81 percent to $33.80 in morning trading. The cruise-line operator has lost more than one-quarter of its value so far this year but is up today after reporting better-than-expected earnings and revenue.

Overall option volume is triple the daily average so far today.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: CCL

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