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Las Vegas Sands Speculators Bet on a Near-Term Pullback

Front-month put volume picks up steam on LVS

by 1/24/2013 9:41 AM
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Put activity ran hotter than usual on Las Vegas Sands Corp. (NYSE:LVS - 53.07) yesterday, as roughly 21,000 contracts crossed the tape -- marking a 46% increase over the equity's average single-session put volume. Garnering notable attention was the February 52.50 put, which saw nearly 7,500 contracts exchanged at a volume-weighted average price (VWAP) of $1.50.

Taking a closer look at the data, it appears that a large chunk of yesterday's volume changed hands at the ask price, pointing to buyer-fueled activity. Meanwhile, open interest at this strike rose overnight, signaling the initiation of new positions. In order for speculators to realize a profit on these bought-to-open puts, LVS must retreat below the breakeven rail of $51 (strike price minus the VWAP) by front-month expiration. This represents a 4.3% drop from Wednesday's closing price of $53.27.

Yesterday's proclivity for puts aside, calls have been the options of choice for the casino operator lately, particularly among the short-term crowd. Schaeffer's put/call open interest ratio (SOIR) for LVS checks in at 0.60, indicating calls easily outpace puts among the front three-months' series of options. In fact, this ratio is docked at an annual nadir, meaning near-term traders are more call-heavy now than at any time during the last 12 months.

LVS has fared well so far in 2013, boasting a year-to-date gain of more than 15%, and besting the broader S&P 500 Index (SPX) by almost 11 percentage points over the past 20 sessions. Furthermore, the security is poised to finish January above its 10-month moving average for the first time April 2012.

However, it should also be noted that LVS is tentatively on deck to report quarterly earnings in early February. The company has a mixed history in the earnings confessional, as it fell short of consensus bottom-line estimates in the last two of the past four consecutive quarters. Wednesday's bears may be counting on another earnings let down, which could pressure the shares lower ahead of February expiration.


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