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Bulls Ignore a Price Drop for Las Vegas Sands Corp. (LVS)

Calls continue to be favored by LVS traders

by 6/12/2013 10:27 AM
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Although Las Vegas Sands Corp. (NYSE:LVS) followed the broader market path lower yesterday to finish 2.3% in the red, that didn't stop bullish speculators from zeroing in on the stock. Roughly 16,000 calls crossed the tape during the course of the session -- slightly higher than the equity's average single-session call volume, and more than triple the number of puts exchanged. The $60 level, which hasn't been surmounted on a daily closing basis in more than a year, was heavily in focus.

Jumping right in, more than 2,400 contracts changed hands at the July 60 call, at a volume-weighted average price (VWAP) of $0.73. Meanwhile, the majority of these calls traded at the ask price, and open interest surged by 1,345 contracts overnight, signaling the initiation of new positions. In order for speculators to profit from their optimistic bets, LVS must conquer the breakeven rail of $60.73 (strike price plus the VWAP) by back-month expiration. As of yesterday's close, the delta for these options was docked at 0.24, meaning they have a near 1-in-4 chance of finishing in the money.

Also receiving notable attention was the August 60 call, where about 1,200 contracts were exchanged -- more than three-quarters of them at the ask price, suggesting they were bought. This strike saw an overnight rise in open interest of 1,132 contracts, again confirming that most of the volume translated into fresh bullish positions. In this scenario, traders are expecting the stock to rise north of $61.46 (strike price plus the VWAP of $1.46) by the close on Aug. 16. This reflects an increase of about 9.3% from the security's current price of $56.22, as well as territory not touched since April 2012.

Last week's put-heavy activity notwithstanding, yesterday's call-skewed volume mirrors the casino operator's recent trend in the options pits. In fact, data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) shows a 20-day call/put volume ratio of 1.73 for LVS. Or, in simpler terms, calls bought to open have nearly doubled puts during the past month.

On the technical front, Las Vegas Sands Corp. has gained around 22% year-to-date. Additionally, the stock remains perched atop its 20-week moving average, which has acted primarily as support since last September. Nevertheless, if the shares stay south of the $60 mark over the next several weeks, the most the aforementioned call buyers risk losing is the initial premium paid.


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