The day started out so well for leisure and travel names like Carnival Corp (CCL) and Wynn Resorts, Limited (WYNN). At first, prices were rising, and there was significant bullish option activity. That lasted until the news came from President Trump that the stimulus negotiations were done until the election.

That may have caught investors off guard. However, since the $1.5 trillion bi-partisan stimulus proposal in the House was killed, a grand compromise was doubtful. In this game of economic chicken, nobody will likely get what they want.

Travel & Leisure Option Activity

The bullish party got started on Monday with Las Vegas Sands Corp (LVS). There were 10,000 contracts traded on the 19 MAR 21  $50 call for $4.65. You can see this information on the option activity log. That’s a sizeable notional value but further out in time.

As you looked around the periphery early in the session, Booking Holdings Inc (BKNG) and many of the airlines were positive on the session. By the end of the session, only Booking finished in the green.

Despite the news and the S&P 500 finishing 1.4% lower on the session, these names finished higher. The question is whether they can continue to rally if there isn’t any stimulus to stimulate travel spending. The silver lining to this is that you had the highest-profile person in the world, President Donald J. Trump, shrug off COVID. Maybe there is a more prominent theme that the market is watching.

Carnival Corp (NYSE: CCL)

Carnival finished with below average call volume and above average put volume. That doesn’t seem very bullish, but you have to dig a little deeper. There were two large buy prints on the 30 OCT 20 $16 call option from $1.09 to $1.19. The contract finished with 12,947 volume against only 885 open interest.

The breakeven for the trade is just over $17. Also, the earnings is on October 8 before the market open and there is significant potential for movement. The expected move for the 9 OCT 20 expiration is $1.00.

Looking at the chart, the price formed a bullish belt hold candle pattern on October 2. That was an indication of support and a slightly higher low than September 24. Measuring the September sell-ff, the 61.8% retracement level is near $17 and is a reasonable near-term target.

Wynn Resorts, Limited (NASDAQ: WYNN)

Wynn finished with call and put volume around 70% above average. Most of the volume got filled between the market. A trade of significance was a long synthetic roll from the October to the December expiration. The 9,000-contract 16 OCT 20 $87.50 synthetic was closed, and the 18 DEC 20 was added. A bullish or long synthetic is where the put is sold, and the call is bought at the same strike price.

Since the call and put were traded at the same strike price, the trade carries a delta of $1. The size of the trade carries a significant amount of exposure and is reflective of expected bullish movement.

Like Carnival, Wynn finished with a shooting star candle pattern on Tuesday as the price faded from its intraday high. The price has been consolidating over the past two weeks as the price continues to test the $70 support level. The upper resistance kicks in around $90 and is a near-term target for the price.

Conclusion

These are imperfect stocks for an imperfect market. Sure, stimulus would help ignite these companies, but the prospects of normalizing could be attractive to speculators. Maybe this is just another step in Trump’s art of the stimulus deal.