Option Traders See Smoother Seas for Carnival Cruises

While the current economic climate has surely inspired many a market participant to chuck it all and take to the open seas (probably a less turbulent environment than the one we're experiencing on land in the canyons of Wall Street), whether this will inspire ordinary Americans to throw on a lei and go on a cruise is a different matter.

Carnival Cruise Lines (CCL - commentary - Cramer's Take), slid 5.2%, setting a new 52-week low at $23.74, after the company's fourth-quarter profit forecast missed Street consensus amid coal-cellar consumer sentiment levels. Carnival Cruise Lines has hitherto remained fairly upbeat about its earnings capacity, even in the increasingly obvious recessionary environment, arguing that cash-strapped Americans are likely to fly less and opt for closer-to-home cruises -- certainly a tantalizing prospect if the cruise in question is an all-inclusive one. And maybe the cruiseliner will be able to leverage this preference with a protracted decline in fuel prices.

Option traders today appear to be siding with this view, expressing it in number of unusual trades. In one 6,000-lot position, a trader appeared to sell the November 22.50/27.50 put spread, taking a $2.65 credit and betting on Carnival shares recovering above the $27.50 level by Nov. 21. Furthermore, with the price of the November 32.50 call hitting a 52-week low today, we observed option traders buying into that weakness in a 3,000-lot position.

The trader in this case may have been closing out an existing short position or simply targeting a deeper out-of-the-money call strike for its relative value. Implied volatility at 90.6% shows an elevation of some 40% above the historic volatility reading on Carnival Cruise Lines stock.

Piling Into Volkswagen

How best to play the unseemly Volkswagen short squeeze that followed a move by Porsche SE to raise its stake in the beaten-down automaker? Option traders turned their attention to contracts on the iShares MSCI Germany Index (EWG - commentary - Cramer's Take), of which Volkswagen is a leading component. Shares rose 7.3% to $16.32, putting a rosy intraday pall on an equity fund that has depleted in value by one-third this year.

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At the time of publication, Darst had no positions in the stocks mentioned.

Rebecca Engmann Darst is the Portfolio Manager for TheStreet.com?s Options Alerts Portfolio newsletter and an equity options analyst for RealMoney Each Thursday at 6:30 a.m. EST, she delivers the early-morning lowdown on option volume and sector trends on CNBC's "Squawk Box." Prior to her work in the equity options market, she spent seven years in Scandinavia as a Copenhagen-based chief reporter for a European Commission news service, correspondent for Spanish daily El Mundo and Radio Netherlands, followed by stints at Nordea Bank and Saxo Bank.