Author Topic: Option prices are too high... time to sell options?  (Read 5795 times)

bwall

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Re: Option prices are too high... time to sell options?
« Reply #50 on: February 10, 2021, 05:51:47 AM »
With all these factors I don't see how CCL can get a $30 handle any time soon.

At the end of the day, though, you have a heavy lid on the stock price.

There's a Feb. 19 bear call spread at the 30 and 32.50 strikes that would yield $0.23 on $2.50 at risk per share, or 9.2% (55% annualized).

CCL is trading at $21 today and reports of a new capital raise are on the horizon, ($600 million in junk bonds)
https://finance.yahoo.com/news/carnival-eyes-another-junk-bond-164238457.html

It looks like this would have been a profitable trade for any takers. I didn't, just watched from the sidelines.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #51 on: February 10, 2021, 06:24:51 AM »
bwall - Carnival has already diluted their stock +57%.  The way I calculate it, there's less than +40% recovery from here.  My call options have beaten the market, but are doing much worse than most of my call options.

In other thread, hodedofome mentioned buying call options on the U.S. Oil fund (USO).  Unlike CCL, there's no dilution (since oil and water don't mix!), which makes the potential recovery much greater.  Of the two, I see greater potential for USO call options.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #52 on: February 10, 2021, 06:56:58 AM »
bwall - Carnival has already diluted their stock +57%.  The way I calculate it, there's less than +40% recovery from here.

What do you mean by "Less than 40% recovery from here"? That, best case scenario, they can go up a maximum of 40%? Or, that there is a 40% chance that they can recover to prior levels? Or something different?

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #53 on: February 10, 2021, 07:20:23 AM »
Actually let me amend that to a range from 35% to 52% in recovery, depending on which date is used.  I used June 28 2019 (CCL $44.99/sh) and Jan 2 2020 (CCL $50.72/sh).

CCL diluted it's shares during the pandemic from 0.71 billion to 1.116 billion, or +57% more shares.  Assuming the market cap stays constant, more shares should mean a lower price/share in recovery.  So dividing by 1.572, I get revised prices of $28.62/sh and $32.27/sh.

CCL is about to open at $21.19/sh, which leaves 35% in a recovery to the June price, and 52% in a full recovery to the Jan price.  That's how I got the range of recoveries - I should have run both calculations and provided the range.

Carnival plans to dry dock many ships until November of this year, so they don't expect a recovery by summer.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #54 on: February 10, 2021, 07:25:18 AM »
Actually let me amend that to a range from 35% to 52% in recovery, depending on which date is used.  I used June 28 2019 (CCL $44.99/sh) and Jan 2 2020 (CCL $50.72/sh).

CCL diluted it's shares during the pandemic from 0.71 billion to 1.116 billion, or +57% more shares.  Assuming the market cap stays constant, more shares should mean a lower price/share in recovery.  So dividing by 1.572, I get revised prices of $28.62/sh and $32.27/sh.

CCL is about to open at $21.19/sh, which leaves 35% in a recovery to the June price, and 52% in a full recovery to the Jan price.  That's how I got the range of recoveries - I should have run both calculations and provided the range.

Carnival plans to dry dock many ships until November of this year, so they don't expect a recovery by summer.

Also, these companies are generally a lot more leveraged than they were in the past - in addition to diluted. Their increased riskiness should earn them a discount compared to 2019. They will from now on be dependent on rock-bottom interest rates.

Overall I consider them good candidates for conservative bear spreads to offset bullishness elsewhere.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #55 on: February 10, 2021, 08:06:24 AM »
@MustacheAndaHalf @ChpBstrd ; great observations/analysis that seems to be spot on to me.

Just setting a marker here:
I'm not approved for writing naked calls, but if I were, I'd sell about ten naked calls Jun. 18, 2021 expiration on CCL at the $30 strike. Bid/ask is $1.60/$1.75.

It looks like free money to me.

*ducks and exits the room quickly after just claiming to have found a free lunch on Wall St.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #56 on: February 10, 2021, 08:53:48 AM »
@bwall - I hope so, since I sold PUTs expiring on that date.  And some next week, and one next year.  The PUTs expiring next week are at 5% of what I sold them, and most likely they'll expire worthless.  I went with lower strike prices than $30.

@ChpBstrd - Why is CCL very likely to fall?  All companies have lots of debt, supported by government stimulus and the Fed propping up the bond market.  Keep in mind CCL might go past it's actual recovery, just like Spirit Airlines did.

That's my suggestion for you: Spirit Airlines (SAVE).  They're already at 113% of their recovery price, when you factor in dilution.  That dilution is not only on y-charts, but plainly stated in CCL's last quarterly report: it's about 1.427.

If you dilute SAVE's closing price of 2020 Jan 2, it becomes $28.49/sh.  But right now, SAVE is trading for $32.00/sh.  They have already exceeded their recovery, without the revenues to back it up.  Look for "average shares" in this report:
https://www.globenewswire.com/news-release/2020/10/28/2116301/0/en/Spirit-Airlines-Reports-Third-Quarter-2020-Results.html

I think the timeline is roughly like this:
* Vaccines (or testing) allow flights to resume, boosting SAVE's stock price
* Traveling is way up as people overcompensate for lockdowns, another boost
* SAVE provides a quarterly report after vaccines and summer travel.. and it's bad

That's why I sold all my SAVE call options recently - I wanted to collect the overshoot while it still existed.  And I got a nice time value premium thrown in, too.  But if I had to buy PUT options (or a bear spread), I'd wait for airlines having good news, and buy PUTS before their quarterly reports came out.
« Last Edit: February 10, 2021, 12:36:10 PM by MustacheAndaHalf »

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #57 on: February 10, 2021, 02:20:28 PM »
@ChpBstrd - Why is CCL very likely to fall?  All companies have lots of debt, supported by government stimulus and the Fed propping up the bond market.  Keep in mind CCL might go past it's actual recovery, just like Spirit Airlines did.

That's my suggestion for you: Spirit Airlines (SAVE).  They're already at 113% of their recovery price, when you factor in dilution.  That dilution is not only on y-charts, but plainly stated in CCL's last quarterly report: it's about 1.427.

If you dilute SAVE's closing price of 2020 Jan 2, it becomes $28.49/sh.  But right now, SAVE is trading for $32.00/sh.  They have already exceeded their recovery, without the revenues to back it up.  Look for "average shares" in this report:
https://www.globenewswire.com/news-release/2020/10/28/2116301/0/en/Spirit-Airlines-Reports-Third-Quarter-2020-Results.html


IMO, full market cap recovery is a little bit premature considering how these companies are all debt shells now. Going beyond full recovery is like assigning a greater value to future earnings when revenue is near zero for an indeterminate time than we assigned when revenue was assumed steady. It's also assigning more value to a company with risky levels of debt than we assigned at lower leverage. Could they still go up? YES, so this is not a yolo bet. Any short bet at this point is "fighting the fed" because Congress is about to pass out $1400 stimulus checks. Also, momentum funds are real and can make their own realities.

I agree SAVE is a good candidate for a short bet or pairs trade. Maybe buy a bear spread on SAVE and a bull spread on something less sensitive to negative COVID news, like a tech stock, making the pairs trade roughly beta-neutral at the time of entry.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #58 on: February 11, 2021, 01:43:20 AM »
Yeah, shorting and PUTs are fighting the Fed - and Congress for that matter.  I didn't expect a full market cap recovery... but it keeps happening.  At this pace, I can expect 1-2 more by the end of February.
---

Some time ago I sold PUT options on CCL at a strike of $17.50, which expire next week.  CCL is currently at $21/sh, so I expect to keep the premium I received for selling the PUT.

How wide can a bull PUT spread get, before it's considered two separate PUTs?

I also bought very low strike price PUTs that only pay off in a bankruptcy.  If the stock drops in half, they will be worthless.  My goal was to partially mitigate the worst-case scenario of bankruptcy.

Would selling a $17.50 strike PUT, and buying a $5 strike PUT be considered a very wide bull PUT spread?

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #59 on: February 11, 2021, 07:40:22 AM »
Yep, a spreadís a spread, no matter how wide, and your broker should recognize them. One could even use very wide bull spreads to approximate the risk profile of a collar but with a smaller cash outlay.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #60 on: February 22, 2021, 11:35:12 AM »
@MustacheAndaHalf @ChpBstrd ; great observations/analysis that seems to be spot on to me.

Just setting a marker here:
I'm not approved for writing naked calls, but if I were, I'd sell about ten naked calls Jun. 18, 2021 expiration on CCL at the $30 strike. Bid/ask is $1.60/$1.75.

It looks like free money to me.

*ducks and exits the room quickly after just claiming to have found a free lunch on Wall St.

Well, it didn't take long for the hypothetical trade to turn sour. CCL is surging past $27 now. Bid/Ask on the Jun. 18 2021 Calls is 4.25/4.30.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #61 on: February 23, 2021, 06:08:08 AM »
With all these factors I don't see how CCL can get a $30 handle any time soon.

At the end of the day, though, you have a heavy lid on the stock price.

Just setting a marker here:
I'm not approved for writing naked calls, but if I were, I'd sell about ten naked calls Jun. 18, 2021 expiration on CCL at the $30 strike. Bid/ask is $1.60/$1.75.

It looks like free money to me.

*ducks and exits the room quickly after just claiming to have found a free lunch on Wall St.

Well, it didn't take long for the hypothetical trade to turn sour. CCL is surging past $27 now. Bid/Ask on the Jun. 18 2021 Calls is 4.25/4.30.

Just as soon as the stock began to rise, hours after reaching $27, CCL announced a new capital raise of $1b, issuing 40m new shares at $25 each, about a 7.5% dilution. My guess is that the management had the next offering all lined up, just told the book runner and underwriter, Goldman Sachs, "wait until the stock hits X, then we announce". Turns out X= $27. The deal closes tomorrow, so how else could GS sell $1billion of CCL in a day, unless they shorted CCL above $27, in advance, b/c they knew they could buy 40m shares at $25 in the offering?

Stock is trading this morning below $25 pre-market. This is the heavy lid on the stock price I was referencing above.

CCL has issued plenty of debt at outrageous interest rates during the pandemic to, ahem, stay afloat, some with the ships as collateral, some without. I anticipate that as the stock rises CCL will retire all that debt with new share issuance, not with earnings/profits.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #62 on: February 23, 2021, 09:10:55 AM »
Do you mean debt at outrageously low interest rates?  It's the same for all junk bonds - they're backstopped by the Federal Reserve, who has stated they will buy junk bonds of "fallen angels", which which I think they mean CCL and Macy's.  If you count on their debt defaulting, you're counting on the Fed failing to deliver.

https://www.carnivalcorp.com/node/63486/html
"We are offering $1,000,000,000 of shares of our common stock in this offering."
The stock price right now is $25.28/sh, which translates to 40 million shares.  They had notes at 1.625% due yesterday that they paid off - so the stock offering might be related.

According to y-charts, they had 1087 million shares as of December 2020.  It looks like a 3.7% dilution to me, which my spreadsheet puts in the $28 - $34/sh range if they recover to 2019 levels.  Keep in mind the Federal Reserve stands behind those junk bonds - they've offered to buy them, which is why yields are so low in that market.

If I was buying puts on Carnival, I'd be more patient.  After vaccinations are complete, and people who missed traveling in 2020 all sign up at once, I expect Carnival to go above it's 2019 levels.  Their fully booked fleet will be fleeting, and the moment of maximum optimism is a better time to buy puts, in my view.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #63 on: February 23, 2021, 10:23:03 AM »
Do you mean debt at outrageously low interest rates?  It's the same for all junk bonds - they're backstopped by the Federal Reserve, who has stated they will buy junk bonds of "fallen angels", which which I think they mean CCL and Macy's.  If you count on their debt defaulting, you're counting on the Fed failing to deliver.

https://www.carnivalcorp.com/node/63486/html
"We are offering $1,000,000,000 of shares of our common stock in this offering."
The stock price right now is $25.28/sh, which translates to 40 million shares.  They had notes at 1.625% due yesterday that they paid off - so the stock offering might be related.

According to y-charts, they had 1087 million shares as of December 2020.  It looks like a 3.7% dilution to me, which my spreadsheet puts in the $28 - $34/sh range if they recover to 2019 levels.  Keep in mind the Federal Reserve stands behind those junk bonds - they've offered to buy them, which is why yields are so low in that market.

If I was buying puts on Carnival, I'd be more patient.  After vaccinations are complete, and people who missed traveling in 2020 all sign up at once, I expect Carnival to go above it's 2019 levels.  Their fully booked fleet will be fleeting, and the moment of maximum optimism is a better time to buy puts, in my view.

CCL issued $4b at 11.9% interest in April, 2020, with another $1b at 11% (or so) in July, 2020. After that, I stopped keeping track. Read about the offerings here:
https://www.bloomberg.com/news/articles/2020-07-14/carnival-visits-debt-markets-a-third-time-as-pandemic-rages-on

I'm not sure if the cruise liners can participate in the gov't funded rescue. Their ships aren't registered in the USA and most employees are not US citizens either. I think they're even headquartered in the Bahamas for tax purposes and such. Can they get their debt backed by the Fed? Not sure. Either way I'm sure that they will never default as long as they can print stock certificates for $20+ each.

The snapshot info sheet said CCL had outstanding shares of 584m. When I look at their balance sheet it does say 1087m shares. Not sure why there's the discrepancy, but one thing is sure; the float has increased dramatically in the last 12 months.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #64 on: May 14, 2021, 07:49:34 AM »
@MustacheAndaHalf @ChpBstrd ; great observations/analysis that seems to be spot on to me.

Just setting a marker here:
I'm not approved for writing naked calls, but if I were, I'd sell about ten naked calls Jun. 18, 2021 expiration on CCL at the $30 strike. Bid/ask is $1.60/$1.75.

It looks like free money to me.

*ducks and exits the room quickly after just claiming to have found a free lunch on Wall St.

Well, it didn't take long for the hypothetical trade to turn sour. CCL is surging past $27 now. Bid/Ask on the Jun. 18 2021 Calls is 4.25/4.30.

Just circling back around to follow up on this hypothetical trade.

As of today, about five weeks before this hypothetical trade would close, CCL is trading at $26 (up 90 cents this a.m.) and the bid/ask on the June 18, 2021 $30 strike is .57/.60.

As of today, it appears as if this hypothetical trade will close out of the money. But, it will have been a bumpy, unpleasant ride for anyone that doesn't enjoy emotional rollercoasters.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #65 on: May 14, 2021, 08:16:31 AM »
@MustacheAndaHalf @ChpBstrd ; great observations/analysis that seems to be spot on to me.

Just setting a marker here:
I'm not approved for writing naked calls, but if I were, I'd sell about ten naked calls Jun. 18, 2021 expiration on CCL at the $30 strike. Bid/ask is $1.60/$1.75.

It looks like free money to me.

*ducks and exits the room quickly after just claiming to have found a free lunch on Wall St.

Well, it didn't take long for the hypothetical trade to turn sour. CCL is surging past $27 now. Bid/Ask on the Jun. 18 2021 Calls is 4.25/4.30.

Just circling back around to follow up on this hypothetical trade.

As of today, about five weeks before this hypothetical trade would close, CCL is trading at $26 (up 90 cents this a.m.) and the bid/ask on the June 18, 2021 $30 strike is .57/.60.

As of today, it appears as if this hypothetical trade will close out of the money. But, it will have been a bumpy, unpleasant ride for anyone that doesn't enjoy emotional rollercoasters.

Send more nudes.

(Call trade ideas you perv!)

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #66 on: May 14, 2021, 11:34:59 AM »
Maybe I should use a different name than "naked calls", for people who think investing is sexy.  But "unprotected calls" is about as suggestive...

CCL was about $21/sh on Feb 10, and quickly pushed to $27/sh.  It came really close to $30/sh.  My recovery spreadsheet predicts anywhere from $27 - $33/sh for CCL stock, based on share dilution and prior market cap.  Were it not for the third wave in Europe, CCL might have hit $30/sh.

I still prefer selling puts, instead.  Predicting "stocks recover" is much easier than naming a stock price that won't be reached.  My CCL puts expired out of the money in Feb, so I kept the premium.  Some other CCL puts I sold did well enough I closed them a couple weeks ago.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #67 on: May 20, 2021, 12:27:33 PM »
Send more nudes.

(Call trade ideas you perv!)

So, here's my current market observation(s): We're in an inflation panic, bond yields are up, growth stocks are down. The expectation is that inflation will pick up and force the Fed to raise rates, thus making growth stocks less attractive vs. cyclical stocks. Growth stocks are selling off, cyclical stocks are booming.

I see inflation concerns as overblown. I believe that the main concern facing the US is deflation, not inflation. Powell & Co. know this and won't raise rates anytime soon. Add to that a couple of other statements Powell said in the past about making sure everyone sees the goods times and we have an easy-money Fed Chairman. Yellen at the Treasury sees it the same way, if my mind-reading crystal ball works like the late night TV ad said it would.

Trading thesis: Growth stocks will be dead money all summer. By then the supply-side inflation will have subsided and equilibrium returns, and the markets will recognize that the Fed isn't going to be raising rates anytime soon. Growth stocks will return to favor and really take off again. In the meantime, the growth stocks have had six months or longer to build their businesses and grow closer to their valuations. Some won't make it, of course, so choose wisely.

By August/Sept. the growth stocks will be stock market road-kill, left for dead by everyone except index funds and HODLers. At that point, buy out of the money LEAPS at the furthest expiration, probably JAN20 2023. I expect you could get 5x-8x returns.

Specific trades: CRSP (Crispr Therapeutics) is trading today at $118, down from an all time high of $220 in Jan. The JAN20 2023 expiration is trading today for around $30 at the $150 strike price. I expect that if the stock is still at this price in Aug/Sept, the $150 strike should sell for $25. If my thesis is correct, then growth stocks should become more enticing in the 4th Q. and remain so for the next year (or so). I expect CRSP to finish their study on Sickle Cell Disease and bring their first product to market by mid-2022. They are also doing studies on cancer although those studies are a few years from completion. Lots of potential upside in the next years.

Full disclosure: I'm HODLing (long) CRSP until they cure a few diseases with gene editing.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #68 on: May 24, 2021, 07:31:46 AM »
Send more nudes.

(Call trade ideas you perv!)

So my last post might have been a bit long-winded and the trading thesis a bit too complex.

Here's a much simpler trade:

Iovance Biotherapeutics (IOVA) dropped last week after the FDA requested more information on one of their cancer drug therapies in Phase II. This is quite common since cancer is a tough nut to crack. But, it's still not a good sign. The stock dropped from low $30's to $16/$17. Now it's trading $18 handle.
The request has pushed back the timeline about six months according to the company, perhaps longer according to the market's reaction.
The big trading news is that the CEO quit to "pursue other opportunities". Apparently curing cancer moved down the list of priorities from one day to the next. For some reason she didn't even give notice or have a successor in place. My guess is that the only reason a CEO quits on short notice is if the ship is about to crash. One could argue that it just did crash. It's going to take time to figure out the new path forward. And time is what option traders feast on. 

The $25 July16 '21 Calls are trading at $1.10 with over 5000 contracts of open interest. If I could sell naked calls (and I can't), I'd sell about ten and laugh my way to the bank as I view the stock's ability to rise above $25 in eight weeks as very unlikely. If I were particularly risk averse, I'd sell twenty July16 '21 Calls at the $30 strike, which are trading at about half the price of the $25.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #69 on: May 24, 2021, 08:03:19 AM »
Trading thesis: Growth stocks will be dead money all summer. By then the supply-side inflation will have subsided and equilibrium returns, and the markets will recognize that the Fed isn't going to be raising rates anytime soon. Growth stocks will return to favor and really take off again. In the meantime, the growth stocks have had six months or longer to build their businesses and grow closer to their valuations. Some won't make it, of course, so choose wisely.

By August/Sept. the growth stocks will be stock market road-kill, left for dead by everyone except index funds and HODLers. At that point, buy out of the money LEAPS at the furthest expiration, probably JAN20 2023. I expect you could get 5x-8x returns.
You mentioned growth stocks being dead, followed by a growth stock you plan to hold.  I have the overall impression you invest in growth stocks... so are you selling some to test your thesis?

It matches my guess from December.  Although Covid-19 was bad for restaurants and airlines, it was great for the largest growth stocks: big tech.  With 2020 being the best year for Amazon and Netflix in a long time, I imagine investors are overly optimistic about some of that performance repeating in 2021.  For tech stocks in general, I expect 2021 to be worse than 2020.  Which sounds like a boring prediction, but it seems to have played out so far in 2021.  Expectations were set to high, and now tech stocks are underperforming.

As people are free to return to normal, I expect them to over-react - get outside, travel, etc.  Not staying inside watching Netflix and ordering from Amazon.. but going to the mall and the movies.  We don't have any prior data to compare against, and analysts tend to be timid and follow the crowd.  So I think they'll underestimate the desire of people to get away from "stay at home" stocks.  That's why I expect some additional drops in tech stocks over summer.


bwall

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Re: Option prices are too high... time to sell options?
« Reply #70 on: May 24, 2021, 09:31:37 AM »
No fancy stock moves for me. I'm hodl-ing.

I just enjoy the parlor game of 'hey, watch me use my crystal ball.' and the inner congratulations I give myself when I'm right. This is of course counterbalanced with my inner scoldings when I'm wrong. My day job kinda requires me to use logic and guesstimates, so it's another way of staying sharp, I guess(-stimate).

Reason why I'm hodl-ing my growth stocks is that with the space they're in (biopharma, biotech) they might get bought out at any time. Not likely, but it's happened before and I didn't realize a sizable 5-figure profit. So, I'm trying to learn from my mistake(s). I think I've got two winners, so I'm going to ride them until...... forever?

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #71 on: May 25, 2021, 07:00:08 AM »
I just enjoy the parlor game of 'hey, watch me use my crystal ball.' and the inner congratulations I give myself when I'm right.
..
Reason why I'm hodl-ing my growth stocks is that with the space they're in (biopharma, biotech) they might get bought out at any time.
It's all fun and games until it's half your portfolio!  I believe you had a similar experience as me in 2020, with a small part doing so well it overwhelmed everything else.

As an aside related to the thread topic, the deeper in the money call options get, the more they perform like the stock.  Which means an option that is 100% time value (OTM) can become an option that is under 5% time value (deep ITM).  When I sell deep ITM calls, it's a little annoying seeing the lack of time value, but the gains make up for it.

I've only seen "HODL" used for Bitcoin so far, not stocks.

(for those who dislike Bitcoin)
https://www.youtube.com/watch?v=UG7zLhEWanc&t=17s
(for those who like Bitcoin)
https://www.youtube.com/watch?v=JZYZoQQ6LJQ

bwall

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Re: Option prices are too high... time to sell options?
« Reply #72 on: May 26, 2021, 08:24:23 AM »
"It's all fun and fames until it's half your portfolio!"

Hah! +1

It's crazy how that happens and i never saw it coming. It's better to be lucky than good is about the best way to describe it.

I might be holding, not hodling, but, boy, that does accurately explain how I feel.  I've got this great sense that the carnival isn't over, but I have no idea how/where to get off. So until I get more clarity, I'm just hanging on.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #73 on: June 18, 2021, 04:45:44 PM »
So my last post might have been a bit long-winded and the trading thesis a bit too complex.

Here's a much simpler trade:

Iovance Biotherapeutics (IOVA) dropped last week after the FDA requested more information on one of their cancer drug therapies in Phase II. This is quite common since cancer is a tough nut to crack. But, it's still not a good sign. The stock dropped from low $30's to $16/$17. Now it's trading $18 handle.
The request has pushed back the timeline about six months according to the company, perhaps longer according to the market's reaction.
The big trading news is that the CEO quit to "pursue other opportunities". Apparently curing cancer moved down the list of priorities from one day to the next. For some reason she didn't even give notice or have a successor in place. My guess is that the only reason a CEO quits on short notice is if the ship is about to crash. One could argue that it just did crash. It's going to take time to figure out the new path forward. And time is what option traders feast on. 

The $25 July16 '21 Calls are trading at $1.10 with over 5000 contracts of open interest. If I could sell naked calls (and I can't), I'd sell about ten and laugh my way to the bank as I view the stock's ability to rise above $25 in eight weeks as very unlikely. If I were particularly risk averse, I'd sell twenty July16 '21 Calls at the $30 strike, which are trading at about half the price of the $25.

Just following up on the Call trades I made earlier:

1) CCL closed today at $28.18. So the hypothetical option trade outlined upthread would have expired today in the money. It would've been a white-knuckle ride and not easy money.
2) IOVA closed today at $24.78. So, the market seems to have forgiven the company (so far) for the prior CEO's shortcomings. With the trade outlined above, the $25 Calls are trading at $2 (up from $1.10) and the $30 Calls are flat since May 24th.

I'll follow up again on the hypothetical IOVA trade after expiration in July. Just a short re-cap; I'm not engaging in these trades, just stating hypothetical trades that I think would be profitable.

svosavvy

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Re: Option prices are too high... time to sell options?
« Reply #74 on: June 21, 2021, 08:12:55 AM »
Not trying to market time here, but, for me it is time to hedge some gains in the names I hold long term and had stocked up on during the covid plunge.

Sell to open 110 call jan 2023 on my BX held in tax sheltered college savings accounts. executed

Sell to open 42 call jan 2023 on my KR. executed

Sell to open 80 call jan 2023 on my ED.  Still open

Sell to open 30 call jan 2023 on my IVZ.  Still open probably won't execute I think the bullish sentiment on these guys has really waned.  Should have sold this contract last week when we were on cloud9.

Good luck out there all.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #75 on: July 16, 2021, 10:52:42 AM »
Send more nudes.

(Call trade ideas you perv!)

So my last post might have been a bit long-winded and the trading thesis a bit too complex.

Here's a much simpler trade:

Iovance Biotherapeutics (IOVA) dropped last week after the FDA requested more information on one of their cancer drug therapies in Phase II. This is quite common since cancer is a tough nut to crack. But, it's still not a good sign. The stock dropped from low $30's to $16/$17. Now it's trading $18 handle.
The request has pushed back the timeline about six months according to the company, perhaps longer according to the market's reaction.
The big trading news is that the CEO quit to "pursue other opportunities". Apparently curing cancer moved down the list of priorities from one day to the next. For some reason she didn't even give notice or have a successor in place. My guess is that the only reason a CEO quits on short notice is if the ship is about to crash. One could argue that it just did crash. It's going to take time to figure out the new path forward. And time is what option traders feast on. 

The $25 July16 '21 Calls are trading at $1.10 with over 5000 contracts of open interest. If I could sell naked calls (and I can't), I'd sell about ten and laugh my way to the bank as I view the stock's ability to rise above $25 in eight weeks as very unlikely. If I were particularly risk averse, I'd sell twenty July16 '21 Calls at the $30 strike, which are trading at about half the price of the $25.

Just wanted to circle back here on this trade suggestion I made in May. It looks like IOVA is going to close today under $23, with just around three hours left in the trading day and contracts trading now at .00/.05 bid/ask. So, the above described trade would have been profitable had one taken it, although the ride may have been a bit bumpy; IOVA did recover to to $27 in the meantime.

The CCL trade outlined above was profitable as was this one. Maybe I need to learn how to take my own advice.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #76 on: July 16, 2021, 10:58:49 AM »
Send more nudes.

(Call trade ideas you perv!)

So my last post might have been a bit long-winded and the trading thesis a bit too complex.

Here's a much simpler trade:

Iovance Biotherapeutics (IOVA) dropped last week after the FDA requested more information on one of their cancer drug therapies in Phase II. This is quite common since cancer is a tough nut to crack. But, it's still not a good sign. The stock dropped from low $30's to $16/$17. Now it's trading $18 handle.
The request has pushed back the timeline about six months according to the company, perhaps longer according to the market's reaction.
The big trading news is that the CEO quit to "pursue other opportunities". Apparently curing cancer moved down the list of priorities from one day to the next. For some reason she didn't even give notice or have a successor in place. My guess is that the only reason a CEO quits on short notice is if the ship is about to crash. One could argue that it just did crash. It's going to take time to figure out the new path forward. And time is what option traders feast on. 

The $25 July16 '21 Calls are trading at $1.10 with over 5000 contracts of open interest. If I could sell naked calls (and I can't), I'd sell about ten and laugh my way to the bank as I view the stock's ability to rise above $25 in eight weeks as very unlikely. If I were particularly risk averse, I'd sell twenty July16 '21 Calls at the $30 strike, which are trading at about half the price of the $25.

Just wanted to circle back here on this trade suggestion I made in May. It looks like IOVA is going to close today under $23, with just around three hours left in the trading day and contracts trading now at .00/.05 bid/ask. So, the above described trade would have been profitable had one taken it, although the ride may have been a bit bumpy; IOVA did recover to to $27 in the meantime.

The CCL trade outlined above was profitable as was this one. Maybe I need to learn how to take my own advice.

If it helps with the regret of missing out, the truly correct answer with IOVA would have been a covered call: less risk than a naked short call plus a higher ROI. :)

bwall

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Re: Option prices are too high... time to sell options?
« Reply #77 on: July 16, 2021, 11:16:04 AM »
If it helps with the regret of missing out, the truly correct answer with IOVA would have been a covered call: less risk than a naked short call plus a higher ROI. :)

Dang! Not only are you right, that idea never even crossed my mind.

If one had purchased, say 1000 shares IOVA at the $18 handle, one could have had enough shares to write the above mentioned ten covered calls. The ensuing run up until today would have provide for a $4/share increase on the stock, plus $1/share on the covered call; $5/$18 = 27.75% return in two months. Annualized this is ..... 166.50% in a year. To spell it out, if you could do this six times in a row, the original $18k would be $48k. But if you rolled the profits from each trade into the next..... then you'd probably learn the hard way how difficult it is to get six of these in a row, and correct on each one. 

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #78 on: July 16, 2021, 11:21:11 AM »
The CCL trade outlined above was profitable as was this one. Maybe I need to learn how to take my own advice.
CCL dropped from near $30/sh to near $21/sh now.  Are you sure that trade is done?

I bought some CCL calls today expiring Jan 2023.  I suspect there will be more travel than expected owing to the effectiveness of vaccines against the delta variant.  Europe seems open to vaccinated American visitors, and a lot of places really need tourism revenue.  We'll see.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #79 on: July 16, 2021, 12:12:33 PM »
Well, the trade that I'd described earlier in the year was over.

At $21, it's hard to be bearish on CCL. How much farther can it drop? Not that much further, I think. But, how much more can it rise? Last quarter they declared $2b in losses, after $500m in the previous quarter. What changed from one quarter to the next to the tune of $1.5b? I can't imagine what it was, other than CCL deciding to push losses from one quarter to the next to the next and now that it's time to open and everyone is saying 'it's over', they book the losses when no one's paying attention. Or so they hope. But, bwall here on the mmm boards is paying attention and I'm calling 'busted!'.  They will continue to issue new shares to retire debt that they took on when the stock was under $15. In that regard, it's better to sell shares at $20 than at $10, but I wouldn't want to be a shareholder in CCL now.  Expect another nasty quarter or two from CCL before it's safe to invest again.

Taking a quick look at the options chains for CCL, I don't see any easy money to be made.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #80 on: July 17, 2021, 10:48:26 AM »
Some companies have heavily diluted their stock, but for CCL that happened last year, and hasn't happened much this year.  They ended 2020 with 1.11B shares, and now have 1.15B shares of stock.
https://ycharts.com/companies/CCL/shares_outstanding

From news reports, it sounds like cruises have restarted.  Won't their losses get smaller and smaller as they put cruise ships back into service?  They have 3 now, and I think 4 more planned soon.  Seems like they're ramping back up.
https://cruisefever.net/third-carnival-cruise-ship-restarts-cruises/

That said, maybe one of the others (Norwegian, Royal Caribbean) is a better investment.  Last year I bought CCL call options, and this year I sold them for over +150% gains.  To me, this looks like chance to invest in a recovery.  CCL recovered at the end of Feb, staying in the $25-$31 range until the end of June.  I hope a similar recovery will happen in the next few months, but I bought call options that expire in Jan 2023 in it takes over a year.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #81 on: July 19, 2021, 05:06:38 AM »
From news reports, it sounds like cruises have restarted.  Won't their losses get smaller and smaller as they put cruise ships back into service?  They have 3 now, and I think 4 more planned soon.  Seems like they're ramping back up.
https://cruisefever.net/third-carnival-cruise-ship-restarts-cruises/

My point about the losses was: CCL delayed realizing a loss on their books until they opened up again. Sometimes companies are a bit flexible in how they write off expenses. They don't want to report a bad quarter so they delay a loss like, say, vessel depreciation. It occurred one quarter, but management has now decided to report it annually instead of quarterly, or every two years instead of annually. Or something along those lines.

We don't know what's going on in their bookkeeping, but it's impossible for a company like CCL with fixed expenses to go from a $500m loss one quarter to a $2b loss the next quarter with zero revenue the entire time. The only way for that to happen is with some kind of delayed write-offs. No other way.

Now, how do we know when the write offs are finished? I believe we will see that as cruises restart, all the profits from restarting will be offset by additional write-offs. It will be confounding "How can their losses be so big now that they're operating again?" Well, they HAD TO delay reporting the losses until the storm had passed and they could show that cruises had begun again.

Anyways, I hope your trade goes well and you get another 150% return at a minimum. Please keep my observations in mind as CCL reports in the next 3 or 4 quarters. Feel free to come back here and say how right or wrong I was.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #82 on: July 19, 2021, 06:57:27 AM »
From news reports, it sounds like cruises have restarted.  Won't their losses get smaller and smaller as they put cruise ships back into service?  They have 3 now, and I think 4 more planned soon.  Seems like they're ramping back up.
https://cruisefever.net/third-carnival-cruise-ship-restarts-cruises/

My point about the losses was: CCL delayed realizing a loss on their books until they opened up again. Sometimes companies are a bit flexible in how they write off expenses. They don't want to report a bad quarter so they delay a loss like, say, vessel depreciation. It occurred one quarter, but management has now decided to report it annually instead of quarterly, or every two years instead of annually. Or something along those lines.

We don't know what's going on in their bookkeeping, but it's impossible for a company like CCL with fixed expenses to go from a $500m loss one quarter to a $2b loss the next quarter with zero revenue the entire time. The only way for that to happen is with some kind of delayed write-offs. No other way.

Now, how do we know when the write offs are finished? I believe we will see that as cruises restart, all the profits from restarting will be offset by additional write-offs. It will be confounding "How can their losses be so big now that they're operating again?" Well, they HAD TO delay reporting the losses until the storm had passed and they could show that cruises had begun again.

Anyways, I hope your trade goes well and you get another 150% return at a minimum. Please keep my observations in mind as CCL reports in the next 3 or 4 quarters. Feel free to come back here and say how right or wrong I was.

The answer is to watch the cash flow.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #83 on: July 20, 2021, 09:25:04 AM »
We don't know what's going on in their bookkeeping, but it's impossible for a company like CCL with fixed expenses to go from a $500m loss one quarter to a $2b loss the next quarter with zero revenue the entire time. The only way for that to happen is with some kind of delayed write-offs. No other way.
Which quarter did that happen?  I poked around in their 10-Q:

Feb 2020 shows $4.8B revenue, $5.5B expenses, total loss $0.7B
May 2020 shows $0.7B revenue, $4.9B expenses, total loss $4.2B
Aug 2020 shows no revenue and $2.9B in expenses / losses.
--> payroll slashed by $0.5B, and "ship and other impairments" hits $0.9B
For Nov 2020, I think they use a 10-K which I didn't look into.
Feb 2021, no revenue on $2.0B in losses.
May 2021, no revenue and $2.0B in losses.

https://www.carnivalcorp.com/financial-information/sec-filings/carnival-plc



Anyways, I hope your trade goes well and you get another 150% return at a minimum. Please keep my observations in mind as CCL reports in the next 3 or 4 quarters. Feel free to come back here and say how right or wrong I was.
Thanks, although there's almost no chance of that happening.  If CCL recovers into the $27-$32 range, I'll start selling.  Last year I bought at lower prices, and less volatility (volatility acts as a tax on options - time value costs more).


Their revenue is minimal: $50M per quarter on expenses in the billions... but this quarter they're ramping up cruises, which should show up in their next 10-Q.  Since 10-Q is filed 5 weeks after the fact, there's probably a more timely source for that information.

Today CCL is up +5%, but that could just be investors realizing they oversold.  I think it will be months before we see if they're making a healthy amount of cash or not.  People have been unable to go on cruises for over a year, so I think there will be plenty of interest.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #84 on: July 20, 2021, 11:01:28 AM »
We don't know what's going on in their bookkeeping, but it's impossible for a company like CCL with fixed expenses to go from a $500m loss one quarter to a $2b loss the next quarter with zero revenue the entire time. The only way for that to happen is with some kind of delayed write-offs. No other way.
Which quarter did that happen?  I poked around in their 10-Q:

Feb 2020 shows $4.8B revenue, $5.5B expenses, total loss $0.7B
May 2020 shows $0.7B revenue, $4.9B expenses, total loss $4.2B
Aug 2020 shows no revenue and $2.9B in expenses / losses.
--> payroll slashed by $0.5B, and "ship and other impairments" hits $0.9B
For Nov 2020, I think they use a 10-K which I didn't look into.
Feb 2021, no revenue on $2.0B in losses.
May 2021, no revenue and $2.0B in losses.

https://www.carnivalcorp.com/financial-information/sec-filings/carnival-plc

hmmm.....thanks for going back and taking the time to look..... After you posted this I double checked the CCL income statement & balance sheet. Sure enough, I guess I misremembered. They've been booking 2.0b losses per quarter for the past two quarters, with a $2.9b, & a + $4b loss quarters prior. With numbers like that, it can only get better! :)

I'm still bearish on the stock. I see no path to $27 for CCL in the next two years or so. If the stock market is forward looking, say, six months or so, then the opening is already well priced in and the stock is still at $20. A 25% run from here is rather unlikely, IMHO, since the biggest catalyst, reopening, has already occurred.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #85 on: July 20, 2021, 01:26:37 PM »
CCL and RCL may just get the worst of both worlds. We'll be reopened, which will allow their ships to sail. We'll also be dealing with waves of the more contagious delta variant, so the ships may sail half empty and with regulatory risks.

They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.

Then just wait until a bunch of breakthrough infections occur on a cruise. About 1/20 of Pfizer/Moderna vaccinated people and about 1/5 J&J vaccinated people will get a serious infection when exposed. Now imagine those stats on the scale of a cruise ship with 2,000 people aboard, a large percentage of whom are completely unvaccinated. This is how the anti-vaxxers slowly kill the cruise industry.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #86 on: July 20, 2021, 01:54:53 PM »
CCL and RCL may just get the worst of both worlds. We'll be reopened, which will allow their ships to sail. We'll also be dealing with waves of the more contagious delta variant, so the ships may sail half empty and with regulatory risks.

They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.

Then just wait until a bunch of breakthrough infections occur on a cruise. About 1/20 of Pfizer/Moderna vaccinated people and about 1/5 J&J vaccinated people will get a serious infection when exposed. Now imagine those stats on the scale of a cruise ship with 2,000 people aboard, a large percentage of whom are completely unvaccinated. This is how the anti-vaxxers slowly kill the cruise industry.

@ChpBstrd ; bringing the bear case with a vengeance! Hell hath no bear case like..... oh, never mind.

These are all good points that I never thought of. I do expect less-than-fully booked cruises, but I think an outbreak onboard might be a bit pessimistic, though that is certainly what we saw in early 2020. Empty bookings mean lost revenue that can never be recouped. It's a tough row to hoe, but I'm sure the cruise lines will muddle through somehow. Most likely there will be fewer cruise ships plying the seas in 2025 vs. 2019.

I was never the type to go on a cruise, so I can't say that my current reluctance to book a cruise is a meaningful indicator.

BicycleB

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Re: Option prices are too high... time to sell options?
« Reply #87 on: July 24, 2021, 09:13:53 AM »
CCL and RCL may just get the worst of both worlds. We'll be reopened, which will allow their ships to sail. We'll also be dealing with waves of the more contagious delta variant, so the ships may sail half empty and with regulatory risks.

They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.

Then just wait until a bunch of breakthrough infections occur on a cruise. About 1/20 of Pfizer/Moderna vaccinated people and about 1/5 J&J vaccinated people will get a serious infection when exposed. Now imagine those stats on the scale of a cruise ship with 2,000 people aboard, a large percentage of whom are completely unvaccinated. This is how the anti-vaxxers slowly kill the cruise industry.

Serious infection?

I thought that for the Pfizer/Moderna vaxxed, infection was almost always mild. What is the level of this serious?

Asking for personal reasons, not just investment.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #88 on: July 24, 2021, 08:30:39 PM »
CCL and RCL may just get the worst of both worlds. We'll be reopened, which will allow their ships to sail. We'll also be dealing with waves of the more contagious delta variant, so the ships may sail half empty and with regulatory risks.

They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.

Then just wait until a bunch of breakthrough infections occur on a cruise. About 1/20 of Pfizer/Moderna vaccinated people and about 1/5 J&J vaccinated people will get a serious infection when exposed. Now imagine those stats on the scale of a cruise ship with 2,000 people aboard, a large percentage of whom are completely unvaccinated. This is how the anti-vaxxers slowly kill the cruise industry.

Serious infection?

I thought that for the Pfizer/Moderna vaxxed, infection was almost always mild. What is the level of this serious?

Asking for personal reasons, not just investment.

CORRECTION: I should have said infection instead of severe infection.

Some stats here: https://www.nbcnews.com/health/health-news/rarely-covid-vaccine-breakthrough-infections-can-be-severe-who-s-n1274164

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #89 on: July 25, 2021, 08:27:35 AM »
I'm still bearish on the stock. I see no path to $27 for CCL in the next two years or so.
How do you explain CCL hitting $27 in Feb, Mar, Apr, May and Jun?  If it has "no path to $27", why does it keep finding a path?  It's actually hit $31.


They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.
Do you think a company would keep people on payroll with idle ships?  They fired those people a year ago, according to their Aug 2020 quarterly report, which included a $0.5B drop in payroll expenses.


Then just wait until a bunch of breakthrough infections occur on a cruise. About 1/20 of Pfizer/Moderna vaccinated people and about 1/5 J&J vaccinated people will get a serious infection when exposed. Now imagine those stats on the scale of a cruise ship with 2,000 people aboard, a large percentage of whom are completely unvaccinated. This is how the anti-vaxxers slowly kill the cruise industry.
I thought Florida is half fully vaccinated?  The next 3 cruises sail out of Florida, suggesting half of people will be fully vaccinated.  Despite the political war on vaccination in Florida, there's still obstacles and downsides for unvaccinated passengers.  They have to get travel insurance, and presumably the insurance companies know the main risk is Covid-19.  They need to refuse insurance or impose higher costs on those who aren't vaccinated.  And according to Carnival's website:
"There is no independent sightseeing in ports of call for unvaccinated guests,
https://www.carnival.com/legal/covid-19-legal-notices/covid-19-guest-protocols

Although that page talks about mandatory vaccinations, I count roughly 2/3rds of their cruises starting in Florida and Texas.  So that's the section that matters most in practice.  It is a bit riskier than I thought - there's a limited number of cruises from the West Coast (CA, WA) and from other East Coast ports (MD, AL).

Naturally the stock market doesn't make an investment risk free, but on balance I expect CCL to do well over the next 18 months (when my new calls expire).

bwall

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Re: Option prices are too high... time to sell options?
« Reply #90 on: July 26, 2021, 04:11:11 AM »
I'm still bearish on the stock. I see no path to $27 for CCL in the next two years or so.
How do you explain CCL hitting $27 in Feb, Mar, Apr, May and Jun?  If it has "no path to $27", why does it keep finding a path?  It's actually hit $31.

I made that statement on July 20, since then the stock has been flat. What it did prior to that, well, doesn't require an explanation as that doesn't apply to it's future valuation.

In other words, it doesn't matter where the stock has been, it matters where it's going.

ChpBstrd

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Re: Option prices are too high... time to sell options?
« Reply #91 on: July 26, 2021, 07:04:40 AM »

They might start printing losses on operations on those half-empty cruises that exceed their losses from simply parking the ships and laying off the crews.
Do you think a company would keep people on payroll with idle ships?  They fired those people a year ago, according to their Aug 2020 quarterly report, which included a $0.5B drop in payroll expenses.

I think idle ships and employees have lower operating costs than sailing ships and working employees. If the difference in cost between the operating company vs the mothballed company is greater than the net revenue received from passengers, the cruise lines could lose more money than they had been losing. This could happen if the ships sail only partially full. Here are some off-the-top-of-my-head variable costs that a cruise line will experience in an operational state that they experience much less of while mothballed:

1) Fuel
2) workers comp claims
3) Maintenance / wear and tear
4) Food/beverage
5) Pilot/tugboat fees
6) Sewage and water
7) Advertisement and commissions
8) customer service
9) lawsuits from employees or customers (e.g. sexual harassment)
10) Possibly insurance if negotiated down during mothball period

The questions are: How many tickets must they sell to recoup these variable costs, and how many are they actually selling?

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #92 on: July 26, 2021, 09:11:44 AM »
I'm still bearish on the stock. I see no path to $27 for CCL in the next two years or so.
How do you explain CCL hitting $27 in Feb, Mar, Apr, May and Jun?  If it has "no path to $27", why does it keep finding a path?  It's actually hit $31.

I made that statement on July 20, since then the stock has been flat. What it did prior to that, well, doesn't require an explanation as that doesn't apply to it's future valuation.

In other words, it doesn't matter where the stock has been, it matters where it's going.
You should talk to bwall earlier in this thread, who claimed it's performance from one quarter to the next was significant.  Now you're saying everything before July 20 can be ignored.  I guess the past doesn't matter when it disproves your theory, like citing the past months where CCL was above $27.

I think your theory is wrong because CCL has already shown us how it behaves during a recovery.  We can look earlier this year and see it above $30/sh, and then dropping down owing to rising Covid infections.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #93 on: July 26, 2021, 09:20:36 AM »
The questions are: How many tickets must they sell to recoup these variable costs, and how many are they actually selling?
Markets also predict where Carnival Cruises will be in 3 mo, 6 mo, etc.  The value of their earnings going into the future.

You can get published 10-Q data from Carnival Cruises (CCL) here:
https://www.carnivalcorp.com/financial-information/sec-filings/carnival-plc
(I selected "Quarterly Filings" - I believe it's also available on the SEC website)

They compare year over year numbers for Jun-Aug 2020 to 2019.  The same period of 2019 cost $668M in payoll, compared to $9M for the same time period in 2020.  Passenger ticket revenue was $4.5B versus $0.
https://www.carnivalcorp.com/node/62201/html


MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #94 on: July 28, 2021, 10:44:05 AM »
Those very confident in Carnival's fall can invest in the opposite direction from me.

Today I sold a put spread on CCL:
sell $30 put - buy $22.50 put = $7.50/sh risk x 100 sh = $750 potential loss
sold $10.30/sh put - bought $5.24/sh put = $5.06/sh x 100 sh = $506 gain now

So over the next 17 months:
if CCL drops 1% and stays there, maximum net loss of $244
if CCL ends up +10%, breakeven, no gain or loss
if CCL goes up +32% ($30/sh) at any point, maximum gain of $506

The same investment can also be done with a call spread: buy a $22.50 call and sell a $30 call.  The maximum gain/loss at the end is the same, but with a put spread you're given $500/contract now, and with a call spread you pay $250/contract now.

bwall

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Re: Option prices are too high... time to sell options?
« Reply #95 on: July 29, 2021, 07:02:56 AM »
Those very confident in Carnival's fall can invest in the opposite direction from me.

Today I sold a put spread on CCL:
sell $30 put - buy $22.50 put = $7.50/sh risk x 100 sh = $750 potential loss
sold $10.30/sh put - bought $5.24/sh put = $5.06/sh x 100 sh = $506 gain now

So over the next 17 months:
if CCL drops 1% and stays there, maximum net loss of $244
if CCL ends up +10%, breakeven, no gain or loss
if CCL goes up +32% ($30/sh) at any point, maximum gain of $506

The same investment can also be done with a call spread: buy a $22.50 call and sell a $30 call.  The maximum gain/loss at the end is the same, but with a put spread you're given $500/contract now, and with a call spread you pay $250/contract now.

This is why I'm a horrible options trader.

I purposely don't get approved for selling naked calls. Because, if I were approved, I'd sell around 1,000 contracts of the 15Oct '21 expiration at, oh, I don't know, 35 or 40 strike price for .22 or .11 , b/c that's well within both your bullish and my bearish range of what could be possible for CCL. I'd be looking at the $22k or $11k in 'free money' and ignoring some lurking iceberg that would cause CCL to go well above that. Selling Calls at the 35 and buying them at the 40 is unattractive, as the risk of loss is now quantified at $250k and you'd have just cut your profit in half. Why risk $250k for a measly $11k profit?

As no successful options trader views options like I do in the above scenario, I just stay away. Besides, I'm past the point in my life where going without sleep for two and a half months for $22k might seem attractive.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #96 on: July 29, 2021, 09:27:06 AM »
So over the next 17 months:
if CCL drops 1% and stays there, maximum net loss of $244
if CCL ends up +10%, breakeven, no gain or loss
if CCL goes up +32% ($30/sh) at any point, maximum gain of $506
This is why I'm a horrible options trader.

I purposely don't get approved for selling naked calls. Because, if I were approved, I'd sell around 1,000 contracts of the 15Oct '21 expiration at, oh, I don't know, 35 or 40 strike price for .22 or .11
When it comes to bearish investments, I sympathize - I have a really bad track record.  Predicted Covid-19 cases that were correct but ignored... GME pennies in front of a steamroller... and various PUT options that will probably expire worthless.  But I've found bullish, long term calls to be profitable.

You mention avoiding derivatives, because you'd sell many naked calls at $35 or $40, for a potentially unlimited loss.  Better would be picking a reasonable risk/reward, like $17.50 - $27.50 call spread.  You buy $27.50 as insurance, and sell the $17.50 call as an investment (I prefer 2023, giving 1.5 years for it to happen).  Each contract has 100 shares.

The $27.50 call contract costs $430, which is insurance.  The $22.50 call can be sold for $810, which is the investment.  You start with $380, and might owe $1000 later.  So max gain $380, max loss $620.  For odds that bad, I would want a smaller investment or high confidence in the outcome.

Using puts instead of calls, you could buy a $27.50 put and sell a $17.50 put.  That costs $860 - $248 = $612.  You pay up front, with a max loss of $612 and potential later gain of $1000 (- $612 cost = $388).

An unlimited loss is much worse than a known maximum loss, so it's something to consider for those thinking of options but not liking unlimited risk.

MustacheAndaHalf

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Re: Option prices are too high... time to sell options?
« Reply #97 on: August 14, 2021, 10:54:27 AM »
Carnival Cruises discovered 27 cases of Covid-19 on a cruise yesterday, sending it's stock down 2%.  But the details of the story give me cause for optimism.
https://edition.cnn.com/travel/article/carnival-cruise-ship-vista-covid-cases/index.html

Texas and Florida are Republican states that demand no cruise disembarking from their states have a vaccination requirement.  Carnival had to make special rules for Texas and Florida.  But the CDC requires 95% of passengers be vaccinated to skip a "trial run", so that's what Carnival did.
"crew on the ship are 99.98% vaccinated and passengers are 96.5% vaccinated"
"All 27 infected individuals are vaccinated and most are asymptomatic,"

I might be too late, but if CCL stays below $23 Monday, I think I'll do some buying. There's extensive measures in place, including contact tracing, 96.5% vaccination rate among passengers, and mask wearing in high risk areas.