All aboard!
Shares of cruise company Carnival have risen dramatically since the broader market bottomed on Oct. 15, climbing 16 percent in under a month. And traders are now taking to the options market to bet on more gains to come.
On Tuesday, four times the stock's average daily call volume traded. And the most active option was the January 41.50-strike calls, of which 8,000 were traded at an average price of $1.35.
Since these calls give their owners the right to buy Carnival shares for $41.50 on January expiration, they will make money if shares of the cruise company rise above that level by more than the cost of the trade, or above $42.85 by January expiration. That's 5 percent above Tuesday's opening price.
While Carnival shares have indeed risen sharply lately, the stock has been an underperformer this year, with a totally flat performance amid many ups and downs.
In fact, options trader Mike Khouw says that buying the January 41.50-strike calls may be a better way to play Carnival than simply buying the stock, especially ahead of earnings in mid-December.
"The stock has been tremendously volatile," Khouw said Tuesday on CNBC's "Fast Money." "So this is a good way to play it if you want to be long, because this thing really does move."
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