Melco Crown Entertainment Ltd (MPEL) Puts Hot Ahead of Macau Data

Put buying has been picking up speed in Melco Crown Entertainment Ltd's (ADR) (NASDAQ:MPEL) options pits ahead of tomorrow's monthly gaming figures from Macau

Nov 30, 2016 at 3:22 PM
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While oil stocks are all the rage in today's OPEC-induced trading, casino stocks could have their turn in the spotlight tomorrow. Specifically, Macau is due to release its monthly gaming figures, and according to Schaeffer's Quantitative Analyst Chris Prybal, if month-over-month figures are strong, there's a slight chance the year-over-year figure could go positive for the first time in two years. One casino stock that's been flying up the charts is Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) -- which Benzinga called "the closest thing on the U.S. markets to a Macau pure-play" -- up 3.2% at $19.73 at last check. Nevertheless, options traders across the major exchanges have been bracing for a pullback.

Specifically, MPEL's 10-day put/call volume ratio at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is docked at a top-heavy 2.09. What's more, this ratio ranks in the 76th annual percentile, meaning puts have been bought to open at a faster-than-usual clip in recent weeks.

Echoing this is MPEL stock's Schaeffer's put/call open interest ratio (SOIR) of 1.56. Not only does this show that puts outweigh calls among options expiring in three months or less, but it ranks just 6 percentage points from a 52-week peak. Simply stated, short-term speculators have rarely been as put-skewed toward MPEL as they are now.

Given MPEL's impressive technical showing, it's possible some of this recent put activity -- particularly, at out-of-the-money strikes -- could be a result of shareholders protecting profits against a pullback. Regardless, there's skepticism evident outside of the options pits, as well. Short interest, for instance, accounts for a healthy 5% of MPEL's available float, or 3.9 times the stock's average daily pace of trading. Plus, 75% of analysts maintain a "hold" or "strong sell" rating on the security.

Looking at the charts, shares of Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) have surged more than 65% since hitting their most recent lows near $11.90 in early July. Plus, MPEL stock is fresh off a Nov. 21 annual high of $20. Should the shares extend this upside, a capitulation from some of the weaker bearish hands and/or a round of bullish brokerage notes could translate into tailwinds for the stock.

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