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Carnival Earnings: What Options Predict

Carnival is cruising into its earnings release Friday morning, and the bulls are getting on board.

OptionMonster's tracking systemsdetected heavy buying of the December 35 calls, which traded more than 6,000 times against open interest of 2,598 contracts. Institutional-sized purchased were recorded for $0.25 to $0.50.

Carnival fell 0.18 percent to $33.82 yesterday and is up 39 percent this year. The cruise-ship operator reported better-than-expected results on Sept. 22. Management also raised its guidance, citing positive booking trends. However, the stock failed to hold a rally attempt that day and consolidated lower, forming a bullish "flag" pattern.

It started breaking free this week after finding support at its 50-day moving average, and was upgraded to overweight by JP Morgan yesterday. Carnival must climb another 5 percent by expiration for the calls to turn a profit.

Other investors sold the January 29 puts for $0.20 and the January 25 puts for $0.10. Volume was below open interest in both strikes, so the transactions may have resulted from shareholders removing protective positions.

Overall options activity in Carnival was five times greater than average. While put volume exceeded calls, most of the puts were sold and most of the calls were bought—a pattern that reflects positive sentiment.

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David Russell is a reporter and writer for OptionMonster.

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