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Option Bears Bet Against Wynn Resorts, Limited (WYNN)

Put options have rarely been more popular on WYNN

by 4/15/2013 10:43 AM
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Speculation on Wynn Resorts, Limited (NASDAQ:WYNN) took a bearish turn last Friday, with 8,760 puts changing hands during the course of the session -- easily outstripping the 5,987 calls that crossed the tape. This influx of put activity represented nearly three times WYNN's average daily volume of 2,944 contracts.

The most active strike was the casino operator's May 110 put, where 3,369 contracts were traded. The vast majority of these contracts were exchanged at the ask price, suggesting they were purchased, and implied volatility at this strike surged by 3.4 percentage points as a result. Open interest here rose over the weekend by 2,973 contracts, so it's safe to assume that options traders were adding new put positions on Wynn Resorts, Limited last Friday.

Those back-month puts traded at a volume-weighted average price (VWAP) of $0.59, which means most of Friday's option bears need WYNN to fall below breakeven at $109.41 (strike price less net debit) in order to turn a profit. The shares are currently trading at $126.23, so these put players need WYNN to decline more than 13.3% over the next five weeks until May-dated options expire.

Looking ahead, Wynn Resorts is tentatively scheduled to report its first-quarter earnings during the second week of May, so put buyers could be betting on another disappointing report. Over the past four quarters, WYNN has fallen short of analysts' consensus profit expectations on three occasions.

From a broader perspective, traders are resoundingly skeptical of the casino stock, despite its year-to-date gain of about 12%. Options players on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have bought to open 3.04 puts for every call on WYNN during the past 10 days, with bearish bets more than tripling their bullish counterparts. This ratio arrives in the 100th annual percentile, suggesting that traders are buying puts over calls at annual-high levels.


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