Time to Buy Post-Inauguration Puts On Wynn Resorts, Limited (WYNN)?

Wynn Resorts, Limited (NASDAQ:WYNN) has a history of struggling in the week after a presidential inauguration, but options traders have kept the faith in the casino stock

Jan 19, 2017 at 2:05 PM
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Optimism has been building toward Wynn Resorts, Limited (NASDAQ:WYNN) in recent weeks, per data from the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). Specifically, options traders across these exchanges have bought to open 16,935 calls on WYNN stock over the past 10 trading days, compared to 6,454 puts. What's more, the resultant call/put volume ratio of 2.62 ranks in the 88th annual percentile, meaning long calls have been initiated relative to puts on WYNN at a faster-than-usual clip.

Echoing this is the equity's gamma-weighted Schaeffer's put/call open interest ratio (SOIR) of 0.72, which indicates near-the-money calls exceed puts among options expiring in three months or less. Plus, total call open interest has outweighed put open interest on WYNN since Dec. 20, with 126,173 calls currently open versus 110,790 puts. Prior to mid-December, puts had the lead over calls looking back to late October.

This growing optimism toward the casino stock is echoed outside of the options pits, as well. Since topping out at a six-year peak in mid-February, short interest on WYNN has been steadily declining. In the two most recent reporting periods alone, short interest fell nearly 24% to 7.2 million shares. While this still accounts for 9% of WYNN's available float, it would take just three days to cover these remaining bearish bets, at the stock's average pace of trading -- suggesting there's little in the way of sideline cash to help buoy the shares.

On the charts, WYNN spent several months rallying hard off its late-January 2016 lows, topping out at $102.44 in early April. And while the shares hit an annual high of $109.50 in mid-September, they've spent most of the past nine months chopping around in the $88-to-$104 region. More recently, the stock has struggled under a trendline connecting a series of lower highs since late November -- and, unlike this pair of oil stocks, has been one of the worst performing S&P 500 Index (SPX) stocks in the week after a presidential inauguration. According to data from Schaeffer's Senior Quantitative Analyst Rocky White, WYNN hasn't put in a positive performance once in the week following the last three inaugurations, averaging a loss of 5.2%.

wynn daily since january 2016

With such high expectations surrounding the recently struggling stock, Wynn Resorts, Limited (NASDAQ:WYNN) could be due for some near-term headwinds. Regardless of how options traders choose to trade the casino stock, though, it's an opportune time for premium buyers to dive in. Specifically, WYNN's Schaeffer's Volatility Index (SVI) of 41% ranks lower than 86% of all comparable readings taken in the past year. In simpler terms, the stock's short-term options are attractively priced at the moment, from a volatility standpoint.

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