Odds Favor Las Vegas Sands Put Buyers

LVS options are attractively priced at the moment

Managing Editor
Sep 13, 2019 at 12:13 PM
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Casino stock Las Vegas Sands Corp. (NYSE:LVS) is trading at $60.17 at last check, just above breakeven. The stock has rebounded sharply off its mid-August lows, adding to its 15% year-to-date gain. However, the equity has now rallied into a key trendline -- one which holds historically bearish implications, suggesting LVS could be headed for another leg lower.

Specifically, the security just rose to within one standard deviation of its 320-day moving average, after a lengthy stretch below the trendline. This signal has flashed two times in the past few years, per Schaeffer's Senior Quantitative Analyst Rocky White, resulting in an average 21-day loss of 3.76%, with 50% of the returns negative. A similar drop from current levels would send LVS down to $57.91 by this time next month -- back below its recently reclaimed 80-day moving average.

Daily LVS with 320 MA

Now is a good time to bet on another leg lower for LVS via the stock's put options. The security's Schaeffer's Volatility Index (SVI) of 30% registers in the low 24th percentile of its annual range. This means that near-term options premiums are pricing in unusually low volatility expectations.

Likewise, Las Vegas Sands stock has a Schaeffer's Volatility Scorecard (SVS) of 85 (out of a possible 100), meaning the security has consistently made bigger moves on the charts than its options premiums have priced in over the past year.

Finally, LVS today received a price-target cut of $1 to $62 from UBS, and more negative notes could be forthcoming. Despite the stock's 320-day moving average coinciding with additional potential resistance from the stock's year-over-year breakeven level and a 10% correction from its year-to-date closing high, nearly half the firms following LVS still rate it a "buy" or better.

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