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Options Intelligence Report: Royal Caribbean Cruises Ltd. (RCL), Smithfield Foods, Inc. (SFD) & AMR Corp. (AMR)

RCL – Royal Caribbean Cruises Ltd.
In line with cautiously optimistic words from five CEOs of major cruise lines at the annual Cruise Shipping Miami convention on Tuesday, one options investor hoping for smooth sailing at Royal Caribbean, but anticipating the occasional squall along the way, purchased 20,000 married put options on the stock this morning. Royal Caribbean’s shares are trading 0.40% lower at $31.50 as of 10:30 am (ET). Cruise industry leaders at the convention suggested average pricing for cruises is improving and should continue to rebound along with the economy.

Perhaps such optimism inspired the options player to get long the stock and shell out an additional $1.05 in premium per contract to get long 20,000 put options at the June $27 strike price. The put contracts appear to be tied to the purchase of shares of the underlying stock when RCL was trading at $31.55. The put options provide the investor with an insurance policy in cases the cruise line’s share price suffers ahead of June expiration. Downside protection kicks in if Royal Caribbean’s shares plummet 17.60% from the current value of the stock to breach the breakeven point at $25.95.

 


SFD – Smithfield Foods, Inc.
Hog producer and pork processor, Smithfield Foods, attracted horned quadrupeds this morning as bulls flooded the pig-pen with optimistic options trading activity. Shares of the underlying stock are currently up 4.25% to $19.24. Investors exchanged more than 18,500 call options at the April $20 strike, which trumps previous existing open interest at that strike of just 5,359 contracts.

The surge in demand for call options on the stock lifted Smithfield’s reading of overall options implied volatility 13.1% to 39.28%. Optimistic individuals purchased 11,000 calls at the April $20 strike for an average premium of $0.51 per contract. Call-buyers stand ready to profit if the pork producer’s shares rally above the average breakeven price of $20.51 ahead of expiration day in April.

 

AMR – AMR Corp.
Shares of the operator of American Airlines are trading 0.30% higher in early trading to stand at $9.62. Bullish activity dominated morning trading on the stock as investors initiated debit call spreads in the April contract.

Investors purchased approximately 5,000 call options at the April $10 strike for an average premium of $0.52 apiece, and sold about the same number of calls at the higher April $12 strike for a premium of $0.08 each. The net cost of the spread amounts to $0.44 per contract, thus positioning bullish traders to accrue maximum potential profits of $1.56 per contract if AMR’s shares rally through $12.00 by April expiration day.

 
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