Friday, December 20, 2019

CUK Carnival Cruises 64 day call

I added Carnival Cruises, symbol CUK, over a few weeks in September, 2019.  I sold quick calls on half the position a few weeks after initiating a position.   Today I sold calls on the rest.   The tables below show how this works.

  • Carnival Cruises pays a big dividend 4.23% and if the calls below are not assigned, it is worth it for income investors to hold CUK just for the dividend.
  • One risk is the cessation of dividend increases.  Between 2015 and 2018 dividends doubled but have not increased since February, 2018.
  • Call premiums are rich being equal to or greater than the quarterly dividend.
  • Call options are broad and provide opportunities to roll expiration dates every couple of months.
  • Dividend plus call premiums make CUK a good trade for income investors.

The first table is the original call I sold that expires today and will be assigned.  This call was a 30 day call.  The expiration date was after the ex-dividend so I have already cashed that check.  I will lose this lot but look below and you can see a similar call opportunity available today.

This second table is the call I sold today that expires in 64 days exactly on the day I expect CUK to be ex-dividend.  The calculations assume the dividend will be paid to me and that the stock will be assigned. In this table, I use my personal cost basis.

In the third table is the call I sold today based on opening a long position simultaneously.  So if you bought CUK and then immediately sold a call on your new position.  The cost basis is slightly different than my basis.  This call also mimics the original call I sold in November (see first table.)

The market is not cheap and to me I feel some frivolity.  People are buying stocks today and sometimes that means the options traders will pay a little more for a call option.  When you get paid the hefty dividend that CUK delivers while you wait for capital gains, it is worth investing in a stock.

M* MoneyMadam
Disclosure:  Long CUK with calls