Markets

What heavy call action means in Carnival

Carnival has been slowly grinding higher, and one investor wants to smooth the ride as earnings approach.

optionMONSTER's monitoring programs detected the sale of 9,700 January 34 calls for $1.15. A block of 6,700 December 32 calls were bought at the same time for $1.575, but volume was below open interest in that strike.

CCL is up 1.6 percent to $33.60, leaving those December calls in the money . This means that if they hadn't been closed today the investor would have been forced to sell shares in the cruise-ship operator at the strike price.

He or she probably owns the stock and is using the options as part of a covered call strategy, which earns income to reduce risk but also limits their ability to profit from a big rally. Rolling the position today will let them earn an additional $2 of upside on their shares because they raised the strike price. (See our Education section)

The trade also occurred shortly before the company's scheduled release of fourth-quarter results next Tuesday. Its last earnings report on Sept. 20 beat expectations on the top and bottom lines as fares rose.

Overall option volume is 5 times greater than 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.


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

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