Today, we’re collecting big profits from Carnival (NYSE: CCL), our leading operator of Caribbean cruises.
As I mentioned in the original recommendation, Carnival has a strong seasonal uptrend right about now. It has historically generated returns of 4% to 40% over the past six winters as snowbirds flock south to sun themselves on Caribbean cruises.
And those returns are only based on the stock’s movement. By using options, we are able to collect substantially larger profits, which is exactly what we’re doing today. While the stock is only up by the single digits, our call option is handing us around a 100% gain — and in just over a month.
Since Carnival’s strong winter rally lasts through January, we’re only going to sell half of our position today. That way, we can close the other half for even greater profits in the coming months.
Action to take: Set a Good ‘Til Canceled limit order to sell to close half the CCL January 2016 $49 call option (CCL160115C00049000) at $5. At last glance, it was trading around $5. If your order is not filled by my next dispatch, I will update you on the trade.
Set Stop-Loss on Kohl’s
Before I sign off, I want us to place another order today. Last week, we bought puts on Kohl’s (NYSE: KSS) to profit from the company’s weak winter trend. Over the last six years, Kohl’s stock has dropped between 7% and 25% now through January — and that trend is already ramping up.
Our puts are now up 80% in less than a week! Much of that jump is because Kohl’s fell 6% today after fellow retailer Macy’s reported dismal results.
Tomorrow, Kohl’s will also report earnings, and while I don’t think the stock will jump higher on the news, I don’t want a big move to wipe out all of our gains. So today let’s place a stop-loss on our Kohl’s positon to ensure we walk away with at least a 25% gain, even if the company miraculously beats expectations.
Action to take: Set a stop-loss to sell to close the KSS January 2016 $47.50 put option (KSS160115P00047500) at $4.15, or a price that nets you at least a 25% gain.
Until next time, good trading…
Editor, Precision Profits