Options Bet on Cruise Line Cost Cuts
After slashing prices to lure budget-conscious vacationers, Royal Caribbean has been making steady headway and yesterday drew some upside options activity.
Trading was focused mainly on the July 20 contracts, where more than 9,300 calls changed hands for $0.25 to $0.35 in a strong buying pattern, according to OptionMonster's tracking systems. The open interest at that strike is 166 contracts and the average call volume is only 11.
RCL closed yesterday up 1.88 percent to $15.21 and added another $0.15 in after-hours trading. The stock has nearly tripled since its March lows but will still need to gain more than $5 in the next six weeks for the July 20 options to turn a profit.
Royal Caribbean and its competitors have suffered a double-whammy in the form of the recession and swine flu fears that sharply curtailed international travel. The cruise lines have wide flexibility in pricing, and aggressive cost-cutting measures have led investors to consider the high seas in search of potential.
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