Trade Strait of Hormuz Headlines and Profit with Unusual Options Activity in Royal Caribbean Stock

The CBOE Volatility Index, or VIX for short, jumped up to 27.89 early in Thursday trading, as traders fretted about the future price of oil after President Trump’s address to the nation Wednesday evening did little to calm the nerves of investors. 

Fortunately, the major indices recovered a decent amount of their losses by midday, as news reports suggested that Iran is working with Oman to develop a protocol to monitor traffic through the Strait of Hormuz. In addition, the economic data released on the day before Good Friday was better than expected. 

Stocks continue to struggle to find direction. One company closely following rising oil prices is Royal Caribbean (RCL), the world’s largest cruise operator by market cap. While it hedges a significant amount of its fuel costs, rising oil prices will add significantly to its operating expenses. 

However, as companies go, Royal Caribbean is a well-managed organization that will be able to navigate (no pun intended) the near-term economic uncertainty. 

In Thursday’s options trading, the cruise operator had one unusually active option. The May 15 $290 call sets up nicely for a Long Strangle. Here’s why. 

Have an excellent weekend. 

Royal Caribbean’s Unusual Options Activity

As I mentioned in the introduction, it had one unusually active option in the final trading day of a shortened holiday week. It’s shown above. Truthfully, it had two. However, the second expired on Thursday; I don’t include options expiring within seven days. 

The call in question had a volume of 2,000, 7.69 times the open interest. That’s about 12% of its 30-day average of 16,584. RCL doesn’t generate massive options volume. 

However, the volume has picked up. In January, there were just four days with a volume of 10,000 or more. In March, there were 12, with seven over 20,000. The highest day in the first three months of 2026 was March 4 at 52,772, a couple of days after the start of the Iran war. 

The average put/call volume ratio in the past five days of trading is 3.41, a very bearish indicator. The average in the first five days of January was 0.61, a very bullish one. 

From the stock’s 2026 high of $356.39, its shares have lost 22% of their value. Volatility is up, and the trend is down; the Barchart Technical Opinion is a 56% Sell rating. 

The long strangle thrives on increased volatility. 

The Long Strangle Strategy

The long strangle strategy expects the share price to move significantly higher or lower due to increased volatility. It involves buying a call option (in this case, the $290 strike) and a put option at a lower strike price. 

Here are the potential put options based on Thursday's trading.

At first glance, you might think the $270 put is the optimal choice for two reasons: 

1) The chance of making money on the long strangle is 40.3%, and

2) The maximum loss probability is 13.8% -- the net debit of $37.60, or the cost of both options -- the lowest of the six put options. 

However, I like the idea of balancing the cost outlay with the probability of profit. With that in mind, you might consider the $250 put, where the net debit is $31.40, 16.4% less than the $270 put, while the profit probability is only 4.2 percentage points less. 

As you can see from the profit/loss graph above, the net debit of $31.40 is 11.29% of the share price. That’s a little above my 10% target, but not greatly so. 

Now, the maximum profit is unlimited, as the share price can go to infinity or go to zero. For example, if President Trump says tomorrow that the Iranians are opening the Strait of Hormuz, oil prices will fall, and RCL stock will rise, given its reliance on fuel (6.4% of 2025 revenue) for its business.  

So, the breakeven is $321.40 [$290 call + $31.40 net debit]  on the upside and $218.60 [$250 put - $31.40 net debit] on the downside. In the past year, RCL stock has traded above the upside breakeven on three occasions: July 2025, August 2025, and February 2026, and below the downside breakeven once in April 2025. 

The expected move of $38.68 in either direction is not expected to take the price outside the upside or downside breakeven by May 15. 

That said, a positive announcement in the Middle East would likely push the stock well above the $38.68 estimate. In contrast, the equivalent downside move would likely only occur if it became evident that the Strait of Hormuz wouldn’t clear for many months or even years.   

The Bottom Line on RCL Stock

In early March, about a week into the Iran war, I suggested to readers that they consider a Dynamic Collar. The dynamic collar combines a Covered Call with a Married Put.

In this particular scenario, you own the stock, sell an April 17 $340 call for income, and buy a June 18 $290 put for downside protection. The share price at the time was $287.00. 

The cost of the married put was $318.30, including $31.30 for the put and $287 per share. The premium on the covered call was $2.65. The cost of the put, as I write this, is $36.60, while the premium on the call is also less, with three trades between $1.57 and $1.78.    

The dynamic collar is often used if you’ve owned the stock for a long time and want to maintain ownership while generating some additional gains from the premium while protecting the downside. With over two months until the June 18 expiration, it still has a chance to be profitable. 

But I digress. 

The long strangle, unlike the dynamic collar, which is a bullish bet, is directional. While I like to think it will soon be trading in the $350s again, the shares gained nearly 1,000% between July 2022 and Aug. 29, 2025, when it hit an all-time high of $366.50. They were bound for a correction, with or without a war playing a role in the decline. 

The use of leverage with this strategy -- 11.29% of the share price -- is a reasonable bet on a big move in either direction in the next six weeks.  

Long-term, I remain an RCL bull.