ROYAL CARIBBEAN CRUISES: Obstacle Cruise
Can We Steer The Titanic?
Executive Summary
To cruise or not to cruise, so many questions.
Is an implied volatility reading of one hundred too high?
Royal Caribbean Cruises has moderate acquisition, bankruptcy, and shareholder dilution risks.
Let’s fly into the weekend on an Iron Condor.
1. Why Do I Care Right Now?
Why would I care about historically healthy tourism businesses facing bankruptcy? Multi-year mobility bans followed by sudden cost-of-debt raises; if you cannot weather the storm, maybe you shouldn’t be cruising. Let’s save the sarcasm for another Rant Around section. Easier to skip, and we can continue healing that way.
We have a more tangible measure at hand. The implied volatility of Royal Caribbean Group (RCL) stands at hundred percent. Hence, we could rephrase the question as to why not everybody is selling volatility at a hundred percent. The lazy answer would be: volatility is too high. Options trading can be confusing.
In the MacroDoζer world, leaving a hundred on the table compares to a teenage girl rejecting TikTok or an adolescent boy dismissing video games.1
Back to cruising. Amongst the big three operators2, Royal Caribbean Cruises faces the most moderate acquisition, bankruptcy, or shareholder dilution risks. We like stable share price developments within our normal distribution volatility ranges. We realize that earnings are coming up but are confident that a potential volatility contraction post-earnings could play into our hands.
2. Useful Background Information
Royal Caribbean has come onto our radar only this afternoon. We usually exclude companies with earnings releases pre-contract expiration. However, we still want to publish the trade before the market closes and the weekend starts. Ergo the background information section will be short and tight.
We screened all relevant reports and releases and are pleased with what we saw. There is a lot and nothing we could highlight; we concluded nothing is just the right amount.
3. Trade Execution
We are selling a neutral iron condor, short 40 put, short 45 call, with wings at 30 and 55, maturity Nov 18, 2022.
Break-evens are at 35 and 50.
3.1 Trade Entry - Oct 7, 2022
Total: 5.25 Credit.
4. Final Comments
Expect updates on BrainDoζers within 4-6 weeks. We use the exact heading, ending with (+/- xy%), and label the cover cartoon with a red Doζed stamp. That way, the performance will be easy to follow.
We are not sending BrainDoζer updates via email unless you specifically ask for it here. We want to keep the information flow light and to the point. You can still freely access all updates on MacroDozer the moment they are released.
My name is Juri von Randow. You can find me on the top banner to the right. MacroDoζing, as if there was no tomorrow. (Email version only.)
Feel free to share. Sincerely.
We highlight gender differences for marketing purposes.
Royal Caribbean Cruises (RCL), Carnival Corporation (CCL), and Norwegian Cruise Line (NCLH).