Options Traders Rush to Casino Stocks After Macau Data

Casino stocks are on the rise after the latest revenue figures out of Macau

by Josh Selway

Published on May 2, 2016 at 3:56 PM
Updated on May 2, 2016 at 4:01 PM

The monthly update on casino activity in Macau -- China's version of Las Vegas -- has been known to cause some outsized moves among casino stocks. This time around, the numbers are acting as a boon to the sector, after revenues from Macau casinos fell less than expected in April. As a result, casino stocks Wynn Resorts, Limited (NASDAQ:WYNN)Las Vegas Sands Corp. (NYSE:LVS)Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), and MGM Resorts International (NYSE:MGM) are all on the rise. Let's take a quick look at how options traders are responding on WYNN, LVS, MPEL, and MGM. 

Starting with WYNN, the stock is up 6.7% at $94.20, as the shares add to their stellar 2016. However, options volume is still running at a below-average intraday pace, even though the company is tentatively scheduled to report earnings this week. 

LVS is up 3.9% at $46.91, looking to recover from last month's post-earnings plummet. In the options pits, calls are crossing at 1.5 times the average intraday clip. Much of the activity has centered on the weekly 5/6 47- and 48-strike calls, as traders place bets before the contracts expire at week's end. 

As for MPEL, the shares have gained 3.6% at $15.34 -- though they remain below their 200-day moving average that's stifled breakout attempts for over two years now. Today's rally has failed to inspire options traders, as volume remains light -- even with MPEL's Schaeffer's Volatilty Index (SVI) of 50% sitting in the low 19th percentile of its annual range. In other words, it's relatively inexpensive to buy short-term MPEL options right now, from a volatility perspective. 

Lastly, MGM is sitting within a chip shot of its year-to-date breakeven level, up 1.8% at $21.68. However, it's actually been put players that have responded to today's price action, with the weekly 5/6 20.50-strike put standing as the most popular option. It looks like traders are buying to open positions here, betting on the stock to reverse lower by week's end -- a time frame that encompasses the casino operator's Thursday morning earnings report.

Elsewhere, it's likely a recent batch of short sellers are kicking themselves amid this surge in casino stocks. More specifically, Wynn Resorts, Limited (NASDAQ:WYNN), Las Vegas Sands Corp. (NYSE:LVS), Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL), and MGM Resorts International (NYSE:MGM) all saw short interest rise in the latest reporting period. 

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