Short-term calls are pricing in higher volatility expectations than puts
Wynn Resorts Ltd. (NASDAQ:WYNN) is up 0.2% at $163.96, after Susquehanna called the casino stock the most compelling relative to its sector peers, citing an attractive risk/reward profile and benefits from Cotai infrastructure improvements. Nevertheless, in the wake of the security's recent sell-off, the brokerage firm lowered its WYNN price target to $204 from $226.
Looking closer at the charts, Wynn stock came within a chip-shot of taking out its three-year high from January back in May, topping out at $202.48. The shares then plummeted all the way down to $151 -- near their November lows, and 320-day moving average, which has been a reliable buy signal in the past. More recently, WYNN appears to have stabilized near $163.25, which is a 23.6% Fibonacci retracement of this recent plunge.
With earnings set for release on Wednesday, Aug. 1, options traders have been leaning bullish on the casino stock. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the equity's 10-day call/put volume ratio of 2.08 ranks in the 85th annual percentile, meaning calls have been bought to open over puts at a quicker-than-usual clip.
Diving deeper, the August 165 call saw one of the biggest increases in open interest over this two-week period, and data from the major exchanges confirms significant buy-to-open activity. In other words, speculators are betting on WYNN closing above the strike at expiration on Friday, Aug. 17.
Meanwhile, 30-day at-the-money implied volatility (IV) on the stock's options is docked at 36.7%, and ranks in the 79th annual percentile -- indicating short-term contracts are pricing in higher-than-usual volatility expectations. However, calls have rarely been more expensive than puts, on a volatility basis, per WYNN's 30-day IV skew of 4.6%, in the 11th percentile of its 12-month range.