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Wynn Resorts Option Traders Roll the Bullish Dice

WYNN bulls are buying 120-strike calls

by 1/2/2013 2:16 PM
Stocks quoted in this article:

Option traders are placing bets on Wynn Resorts, Limited (NASDAQ:WYNN - 118.77), especially on the bullish side of the aisle. In afternoon trading, the casino concern has already seen roughly 9,750 calls cross the tape -- about four times its average intraday call volume.

Most active have been February 120 and 1/4 120-strike calls, which have seen around 1,600 and 1,300 contracts change hands, respectively. Volume has exceeded open interest at both strikes, and most of the calls have traded at the ask price, suggesting speculators are buying the calls to open.

By purchasing the calls to open, the traders are expecting WYNN to topple the $120 marker within the options' respective lifetimes. More specifically, the volume-weighted average price (VWAP) of the February-dated calls is $3.19, meaning the buyers will profit if WYNN surmounts the $123.19 level (strike plus VWAP) within the next couple of months. Meanwhile, the VWAP of the soon-to-expire weekly calls is $0.42, indicating the buyers will reap a reward if WYNN conquers the $120.42 level by Friday's closing bell.

However, today's appetite for bullish bets stands in stark contrast to the growing trend. On the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the stock's 10-day put/call volume ratio of 0.96 ranks in the 70th percentile of its annual range. Or, in simpler terms, option traders have bought to open WYNN puts over calls at a faster-than-usual pace during the past two weeks.

Echoing that trend, the security's Schaeffer's put/call open interest ratio (SOIR) stands at 2.19, indicating that puts more than double calls among options expiring within three months. What's more, this ratio rests at a 52-week peak, suggesting near-term option players haven't been more put-skewed at any other time during the past year.

At last check, the shares of WYNN have gapped 5.6% higher, thanks to data showing Macau gambling revenue hit an all-time monthly high in December.


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