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Las Vegas Sands Corp. (LVS) Bulls Brush Off China Concerns

Weekly call players flock toward LVS

by 6/24/2013 2:07 PM
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Shares of Las Vegas Sands Corp. (NYSE:LVS) have taken a beating today -- shedding about 4.6% -- as some downbeat news out of China has investors concerned about its impact on Macau-based casinos. Nevertheless, bullish bettors haven't shied away from the stock, as roughly 37,000 calls have changed hands thus far -- almost four times the equity's expected intraday call volume. By comparison, around 25,000 puts have crossed the tape.

Taking center stage in today's session is the weekly 6/28 50-strike call, where close to 4,900 contracts have been exchanged -- the majority of them at the ask price, suggesting they were bought. These near-the-money calls traded at a volume-weighted average price (VWAP) of $0.65. Meanwhile, this strike holds open interest of just 144 contracts, and implied volatility has soared 16 percentage points -- indications of buy-to-open activity.

In this scenario, the speculators will profit if LVS surmounts the breakeven rail of $50.65 (strike price plus the VWAP) by this Friday's close, when these weekly options expire. This reflects an increase of about 1.5% from the stock's current price at $49.88. Also of note, the delta for these options sits at 0.41, meaning they have a 41% chance of finishing in the money. However, even if the equity fails to recover from today's losses by week's end, the most the traders stand to lose is the initial premium paid for their long calls.

This predilection for near-term calls over their bearish counterparts is more of the same for the casino operator. Schaeffer's put/call open interest ratio (SOIR) for LVS stands at 0.43, indicating calls more than double puts among the front three-months' series of options. In fact, this ratio is docked at a 12-month nadir, meaning short-term speculators are more optimistically aligned toward the stock now than at any other time during the past year.

Technically speaking, however, today's decline has whittled the equity's year-to-date gains to just 8%. Meanwhile, Las Vegas Sands Corp. (NYSE:LVS) has trailed the broader S&P 500 Index (SPX) by close to 9 percentage points during the past three months. On the charts, the security is now on pace to finish the week below its 40-week moving average for the first time since late December.


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