By David Russell of OptionMonster
NEW YORK -- Carnival (CCL) has been grinding lower since mid-January, but now the bulls are looking for a rally.
OptionMonster's tracking programs detected the purchase of more than 5,000 July 40 calls for $1.15 in volume well above previous open interest of 2,343 contracts Wednesday. Some 3,700 July 41s were also bought for 75 cents to 90 cents, though volume was below previous positioning in those.
Long calls lock in the price where investors can buy a stock, letting them cheaply bet on a rally. They can also generate significant leverage if shares move in the right direction, but the contracts can quickly lose value on a pullback.
Carnival rose 1.70% to $39.59 Wednesday. The cruise-ship operator's last earnings report in March beat expectations, but pricing worries sent shares lower. But the stock has shown signs of breaking its downtrend in the last month and is now finding support above its 50-day moving average.
Total option volume in the name was 8 times greater than average in the session, with calls outnumbering puts by a bullish 30-to-1 ratio.
Russell has no positions in CCL.