Puts are quickly becoming the option of choice on Wynn Resorts, Limited (WYNN: sentiment, chart, options). During the past five days, traders on the International Securities Exchange (ISE) have bought to open 15,043 puts on WYNN, compared to just 6,500 calls. In other words, option players during the past week have purchased 2.31 times more bearish bets than bullish on the casino issue.
Taking a slightly longer-term look, WYNN's 10-day ISE put/call volume ratio reveals a modestly skeptical bias. That ratio arrived today at 1.96, with puts bought to open roughly doubling calls during the past two weeks. This reading ranks higher than 61.3% of comparable readings taken within the previous 52 weeks, revealing that puts have been slightly more popular than usual of late.
In keeping with this theme, WYNN's Schaeffer's put/call open interest ratio (SOIR) has raced sharply higher of late. Post-expiration, on July 20, the stock's SOIR checked in at a new annual low of 0.73. In the three weeks since, the SOIR has vaulted to its current reading of 1.30, in the 41st annual percentile. During this time frame, near-term call open interest has climbed by 77.3%, while comparable put open interest has ballooned by 215.6%.
The stock's August 50 strike has been a particular favorite among the recent crop of put players. One week ago, this option had 8,170 contracts in residence; today, open interest at this strike stands at 10,291 contracts. As demand for this out-of-the-money put rises, its implied volatility has escalated during the past week from 68.2% to 74.2%.
In fact, WYNN's August 50 strike is the site of peak front-month put open interest. The second most popular put strike is even deeper out of the money -- the August 40 put carries 7,195 contracts in residence. Meanwhile, on the call side, peak front-month open interest consists of a comparatively scant 4,272 contracts at the August 55 strike.
This open interest configuration confirms the theory that skepticism is nearly palpable right now in WYNN's option pits. With the shares trading just shy of the $60 level, traders are gravitating toward deep out-of-the-money puts and solidly in-the-money calls. Meanwhile, out-of-the-money call open interest is virtually negligible. In short, very few speculators are betting on the shares to climb during the short term.
Elsewhere on Wall Street, short sellers are also rushing to add new bearish bets on WYNN. Short interest is up 32.4% during the past month, and jumped by nearly 10% during just the most recent reporting period. Now, these shorted shares account for a hefty 24.1% of the equity's available float, or roughly 4.9 times the stock's average daily trading volume.
Judging by the recent flood of pessimistic speculation among both put players and short sellers, it seems safe to say that investors have very low expectations for WYNN.
In light of the stock's breakneck progress on the charts, this negative sentiment is rather surprising. WYNN is up 38.4% year-to-date, and its positive momentum has only accelerated of late -- currently, the security sports a 20-day relative-strength reading of 161.4% versus the broader S&P 500 Index (SPX).
Nevertheless, not even the company's insiders have been able to resist the urge to sell into this strength. And, after checking out the charts, it's easy to pinpoint a few potential obstacles blocking WYNN's path higher.
First up, the equity has now gapped significantly beyond support at its 10-week and 20-week moving averages. These trendlines lie as far south as the $40 neighborhood, which means that any potential pullback in the shares could be steep. Plus, the equity is stalling out near the round-number $60 region, which previously capped WYNN's progress during the latter months of 2008.
Meanwhile, just a few points north of the $60 level is WYNN's 20-month moving average. This long-term trendline hasn't been toppled on a monthly closing basis since January 2008, and it could easily act as a technical roadblock should the shares continue their recent advance.
From a contrarian perspective, it's certainly encouraging to see so much negative sentiment being levied against this outperforming stock. With plenty of pessimism on Wall Street, it's safe to say that there's still ample sideline cash to support future gains. However, it's hard to ignore the looming technical barriers that could stymie WYNN's advances during the short term. Brave traders can take their chances on this casino stock while the rally's still hot, but cautious speculators may want to wait for a decisive breach of pressure in the $60 region.
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