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Option Bulls Circle Las Vegas Sands Corp. (LVS)

LVS option traders expect an extended rebound

by 2/22/2013 12:33 PM
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The shares of Las Vegas Sands Corp. (NYSE:LVS - 50.18) are on the mend, rebounding after a test of their 20-week moving average, which coincides with the stock's bull gap from early January. What's more, option traders are rolling the dice on an extended bounce for the casino concern, with speculators scooping up calls at a rapid-fire rate.

Around midday, LVS has seen about 45,000 calls cross the tape -- more than three times its average intraday call volume, and about five times the number of LVS puts exchanged. More than half of the action has transpired at the May 52.50 call, where nearly 23,500 contracts have traded. Digging even deeper, the bulk of the volume crossed in one fell swoop, with a block of almost 17,400 contracts exchanged at the ask price of $2.05, implying they were likely bought. Plus, volume has exceeded open interest at the strike, hinting at newly opened bullish bets.

By purchasing the calls to open, the buyers will make money if LVS topples the $54.55 level (strike plus premium paid) within the next couple of months. From its current share price, it would take a rally of about 8.7% to hit breakeven. At last check, delta for the option stands at 0.42, implying a 42% chance of finishing in the money at expiration. However, even if LVS remains south of the strike, the most the buyers can lose is the premium paid at initiation.

From a sentiment perspective, today's appetite for short-term calls marks a change of pace for LVS speculators. The stock's Schaeffer's put/call open interest ratio (SOIR) of 0.93 registers in the 79th percentile of its annual range, implying that near-term options traders are more put-skewed than usual right now.

At last check, LVS is roughly 2.2% higher to trade back atop the $50 level. As alluded to earlier, the security recently retreated into a former roadblock in the $48-$49 neighborhood -- home to its ascending 20-week moving average, and site of its early January bull gap. However, the equity is now staring up at its once-supportive 10-week trendline, which could switch roles to serve as a short-to-intermediate-term speed bump.

Weekly Chart of LVS since August 2012 With 10-Week and 20-Week Moving Averages


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