Schaeffer's Trading Floor Blog

Las Vegas Sands Corp. (LVS) Option Traders Bet On an Earnings Boost

LVS is scheduled to report fourth-quarter earnings after tomorrow's close

by 1/28/2014 11:43 AM
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Option traders have been upping the bullish ante on Las Vegas Sands Corp. (NYSE:LVS) in recent weeks, as the casino concern prepares to tell all in the earnings confessional tomorrow night. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day call/put volume ratio has risen to 2.88 from its Dec. 27 reading of 1.58. What's more, the current ratio ranks in the 92nd percentile of its annual range, meaning speculators have bought to open calls over puts with more rapidity just 8% of the time within the past year.

Echoing this preference for calls over puts is the action happening in LVS' short-term options pits. Since the start of the February expiration cycle (Jan. 21, to be specific), call open interest among options expiring in three months or less has grown 29%, compared to a slimmer rise of 17% for put open interest.

In the front three-months' series of options, peak call open interest can be found at the February 82.50 strike, where 8,478 contracts reside. Since the turn of the calendar year, nearly 8,000 contracts have been added here -- the majority of which have been bought to open. In other words, call buyers are anticipating a move north of $82.50 by the close on Friday, Feb. 21, which is when the options expire. This level sits 10% above the stock's current perch of $74.89, as well as in territory not explored by LVS since April 2008. (Although, the security came within a hair's breadth last Tuesday, when it tagged the $82.48 mark.)

Against this increased demand for LVS options, the stock's 30-day, at-the-money implied volatility has risen to 35.9% from its Jan. 14 reading of 25.6%. In a similar vein, the equity's Schaeffer's Volatility Index (SVI) has moved to 0.37 from 0.27 in the same time frame. Meanwhile, the current SVI reading ranks higher than 56% of comparable readings taken in the past year, suggesting premium on front-month options is slightly more expensive than usual, from a volatility perspective.

As touched upon, Las Vegas Sands Corp. (NYSE:LVS) is slated to report quarterly earnings after tomorrow's close. The company has matched or exceeded analysts' bottom-line projections in four of the past eight quarters, and the stock has followed up the results by adding an average of 0.6% and 0.03% in the subsequent day and week, respectively. For LVS' fourth quarter, consensus estimates are for a profit of 84 cents per share -- a 56% improvement over last year's results.

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