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Weekly Puts in Play on Wynn Resorts

WYNN bears expect a rough couple of sessions for the casino stock

by 12/13/2012 9:24 AM
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Short-term bears descended on Wynn Resorts, Limited (NASDAQ:WYNN - 113.46) on Wednesday, with put volume on the casino stock soaring to more than double the usual level. All told, roughly 10,000 puts changed hands on WYNN during the course of the session, easily outstripping the 5,941 calls that crossed the tape.

The most active option was WYNN's weekly 12/14 110-strike put, where 1,900 contracts were exchanged. The majority of these puts traded at the ask price, indicating they were purchased, and open interest rose overnight by 1,382 contracts. By buying to open these soon-to-expire puts, traders are expecting WYNN to take a turn for the worse through the end of this week.

Specifically, those weekly 110 puts traded at a volume-weighted average price (VWAP) of $0.59. Based on this cost of entry, put buyers need WYNN to fall below breakeven at $109.41 (strike price minus premium paid) before they'll start to collect profits. And since these puts expire at the end of the week, WYNN has only two trading days to hit this bearish target.

The shares settled Wednesday at $113.46, so yesterday's weekly put buyers are banking on WYNN to fall more than 3.6% through Friday's close. The stock has enjoyed a healthy bounce from its mid-November lows near the $104 area, but WYNN is now staring up at resistance in the form of its 320-day moving average. This trendline has rebuffed a few rally attempts already during the fourth quarter, and could continue to cause trouble for the gaming issue going forward.

 Daily Chart of WYNN since April 2012 With 320-Day Moving Average


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