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Wynn Resorts, Limited (WYNN) Bulls Roll the Dice On a Short-Term Surge

Wynn Resorts, Limited has found a foothold near its year-to-date breakeven mark

by 8/28/2014 2:12 PM
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Wynn Resorts, Limited (NASDAQ:WYNN) has been hovering on both sides of breakeven today, with the shares last seen up 0.3% at $196.83. The stock is finding a foothold in the $194-$195 region -- home to its year-to-date breakeven mark -- which has served as support throughout 2014. In the options arena, a number of speculators are betting on a bigger bounce from this area over the next several weeks. Against this demand for short-term contracts, WYNN's 30-day at-the-money implied volatility (IV) is up 2.8 % to 23.3%.

Specifically, the two most active WYNN options are the weekly 8/29 197.50-strike and September 202.50 calls, where a collective 2,665 contracts have traded. The majority of these out-of-the-money calls have gone off on the ask side, IV is on the rise, and volume outstrips open interest at the front-month contract -- all signs of buy-to-open activity.

The weekly options are being purchased for a volume-weighted average price (VWAP) of $0.42, making breakeven at tomorrow's close $197.92 (strike plus VWAP). Given the added time value, the VWAP for the September calls is $1.97, making breakeven $204.47. Profit for both sets of traders is theoretically unlimited beyond these points, while losses are limited to the initial premium paid, should the stock settle south of the strike at the respective expiration dates.

Today's preference for short-term calls only highlights the withstanding trend seen in Wynn Resorts, Limited's (NASDAQ:WYNN) options pits. In fact, the equity's Schaeffer's put/call open interest ratio (SOIR) of 0.60 ranks in the lowest percentile of its annual range. Simply stated, near-term option traders are more call-heavy now toward WYNN than at any other point within the past year.


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