Macau Data Ignites Options Betting on Casino Stocks

Options volume has picked up on casino stocks after gambling revenue in Macau fell once again

Jun 1, 2016 at 11:03 AM
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Unlike last month, gambling revenue out of Macau tumbled more than forecast in May, falling for a 24th consecutive month. As such, options volume is accelerated on casino stocks Wynn Resorts, Limited (NASDAQ:WYNN)Las Vegas Sands Corp. (NYSE:LVS), and MGM Resorts International (NYSE:MGM). Below we'll take a quick look at recent options activity on WYNN, LVS, and MGM. 

WYNN has partially recovered from an early 3.2% slide to trade just 0.5% lower at $95.70. The casino stock has been bouncing between $90 and $100 for about three months, and now it appears the rising 60-day moving average is stepping up as support. This would be fine with options traders, who have been betting bullishly of late.

Specifically, call buying has outpaced put buying during the past two weeks at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This preference for calls over puts is continuing today, with Wynn Resorts, Limited call options trading at 1.6 times the expected intraday volume. The weekly 6/3 series is especially popular, as traders place bets on WYNN before the options expire at the close this Friday.

LVS is also off its early morning lows, though the shares are still 0.5% below breakeven at $46.02. The stock has traded in a tight range between $44 and $46 since its late-April gap lower on earnings, and is currently battling its 200-day moving average. 

In the casino stock's options pits, call buying has more than tripled put buying during the past two weeks, according to data from the ISE, CBOE, and PHLX. Las Vegas Sands Corp. calls are once again hot today, with the contracts trading at six times the norm, and volume arriving in the 99th annual percentile. This spike in volume is the result of heavy activity at the weekly 6/3 47-strike call, where a block of 6,092 contracts was sold to close, according to Trade-Alert.

MGM has also experienced heavy call buying during the past two weeks. Across the three major options exchanges, the stock has a 10-day call/put volume ratio of 7.78, which outranks more than three-fourths of the past year's readings. Today, however, call volume is slower than usual, while put volume is accelerated. It looks like some traders are betting on MGM falling below $20 in the next few weeks by buying to open the June 20 put, as confirmed by data from the ISE.

On the charts, the stock is up 1% at $23.07. However, MGM Resorts International has struggled near the $23 level since late December -- home to its year-to-date breakeven level -- so option bulls aren't out of the woods just yet.

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