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Las Vegas Sands Corp. (LVS) Option Buyers Gamble On More Upside

LVS bulls are picking up soon-to-expire call options

by 2/13/2013 12:13 PM
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The shares of Las Vegas Sands Corp. (NYSE:LVS - 53.89) are defying broad-market headwinds today, and option traders are expecting a strong end to the week. Around midday, the casino operator has seen around 30,000 calls change hands -- more than twice its average intraday volume, and about three times the number of LVS puts traded thus far.

Most popular are the February 55 and 57.50 calls, which have seen around 10,500 and 6,600 contracts cross the tape, respectively. Implied volatility on the 55-strike call was last seen 2.6 percentage points higher, and volume has exceeded open interest at the deeper out-of-the-money strike, pointing to new initiations. Plus, the majority of the front-month calls have traded at the ask price, suggesting they were bought.

By purchasing the calls to open, the buyers expect LVS to surmount the respective strikes by the closing bell on Friday, when February-dated options expire. More specifically, the volume-weighted average price (VWAP) of the 55-strike calls is $0.47, meaning the buyers will profit if LVS conquers the $55.47 level (strike price plus VWAP). Meanwhile, traders are paying an average of $0.11 for the 57.50-strike calls, indicating a breakeven of $57.61 -- an upside move of about 6.7% from current levels. However, even if LVS remains south of the strikes, the most the buyers can lose is the initial premium paid.

Expanding our sentiment scope, we find that today's appetite for bullish bets is just more of the same for LVS. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), traders have bought to open more than two calls for every put during the past 10 sessions. Furthermore, the stock's 10-day call/put volume ratio of 2.06 ranks in the 67th percentile of its annual range, suggesting speculators are establishing long calls at a faster-than-usual clip.

Technically speaking, the growing affinity for calls isn't too surprising. The shares have outperformed the broader S&P 500 Index (SPX) by nearly 18 percentage points during the past three months, and touched a nine-month high of $55.94 in early February. In today's session, the stock is up 0.3% to wink at the $53.89 level.


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