Both the dividend and debt levels have important implications for the stock's volatility, the price of options generally, and the relationship between the price of puts and calls.
The trade All else equal, higher levels of corporate debt increase leverage and, therefore, the volatility of a company's equity.
Carnival's options are nearly twice as expensive now as they were at the end of 2019, but the higher levels of debt justify higher prices.
Typically, we do not recommend selling covered calls into earnings unless options prices are very high, as earnings provide a catalyst that can move a stock.
In this case, an 8% implied move is substantial, but due to the high debt levels, it merely represents a fair price for the options.
Persons:
Francis Scott Key
Organizations:
Management, CNBC, NBC UNIVERSAL
Locations:
Baltimore, Norfolk , Virginia