Buying RCL at a Discount? You Are Getting Paid to Do It
At about $260.43 a share, Royal Caribbean (RCL) is trading about 28% below its 52W high.
Do you think RCL stock is a good long-term bet at current levels? What about at a 30% discount at about $180 per share? If you think that is a steal, and have some cash ready to go, here is a trade.
13% annualized yield at 30% margin of safety, by selling Put Options.
- Sell a long-dated Put option expiring 3/19/2027, with a strike price of $180
- Collect roughly $1,455 in premium per contract (each contract represents 100 shares)
- That’s about 9.0% annualized yield on the $18,000 you’re setting aside for the possibility of buying the stock
- This cash parked in a savings or money market account will earn an extra 4.0%, taking total yield to 13.0%
- And you give yourself a chance to buy RCL stock at deep discounted price of $180
However, this is not the only stock strategy in town. Trefis High Quality Portfolio is a sophisticated framework designed to reduce stock-specific risk while giving upside exposure.
Possible Trade Outcomes: You Win Either Way
| Stock Price Outcome | What It Means For You |
|---|---|
| RCL stays above $180 | You keep the full $1,455 premium – 8.1% extra income over the next 330 days on cash that might otherwise earn you 4.0% or less. You never buy the stock and simply walk away with the cash. |
| RCL closes below $180 | You’ll be obligated to buy 100 shares at $180. But thanks to $1,455 premium, your effective cost basis is just $165.45 per share – a roughly 36% discount from current level. |
But to hold this trade with conviction, you want to see long term upside in the stock. Because if it comes to it, you want to be excited about buying the stock cheap.
Check out Buy or Sell RCL Stock and Royal Caribbean Investment Highlights
If you are not comfortable with options or stock-specific trades, Portfolios are the way to go as they can protect and grow wealth even better.
Portfolios Are The Smarter Way To Invest
Individual stocks are unpredictable. A smart portfolio helps you invest, limits downside shocks, and provides upside exposure.
The Trefis High Quality (HQ) Portfolio, with a collection of 30 stocks, has a track record of comfortably outperforming its benchmark that includes all 3 – the S&P 500, S&P mid-cap, and Russell 2000 indices. Why is that? HQ Portfolio has posted more than 105% in cumulative return since inception, with less risk versus the benchmark index, as evident in HQ Portfolio performance metrics.