Bears Pounce as Wynn Resorts, Limited (WYNN) Shares Get Flushed

Wynn Resorts, Limited (WYNN) is reeling on a downbeat earnings report and a round of price-target cuts

Nov 3, 2016 at 11:20 AM
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Wynn Resorts, Limited (NASDAQ:WYNN) came up snake eyes in the earnings confessional last night, and a lower-than-expected quarterly profit has prompted a raft of negative analyst attention. Specifically, no fewer than seven brokerage firms have slashed their price targets on the gaming stock, with the deepest cut courtesy of Nomura (to $77 from $83). Meanwhile, bearish betting has ramped up in WYNN's options pits.

Before more closely examining the casino concern's options activity, it's necessary to note the impact earnings, as well as the round of price-target cuts, has had on the shares. At last check, WYNN was down 7.2% at $89.56 -- and threatening to close below its 200-day moving average for the first time since February. Just a few weeks ago, the stock was hovering at annual-high levels near $110, but has since pulled back sharply -- with one key trendline failing to offer support.

If options traders have their druthers, this bearish momentum will continue. Wynn Resorts puts are currently trading at four times the usual intraday pace, and in the 99th percentile of their annual range. Leading the way is the weekly 11/4 90-strike put, where the International Securities Exchange (ISE) confirms considerable buy-to-open activity. In other words, this group of speculators is counting on additional downside through tomorrow's close, when the series expires.

It's been this way for a while. At 0.78, WYNN's 10-day put/call volume ratio at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) is call-tilted on an absolute basis. However, this reading ranks in the bearishly skewed 80th percentile of its annual range. In other words, put buying has really picked up in recent weeks, relative to comparable data from the past year.

Today's traders aren't the only ones eyeing the 90 strike, either. During the last 10 sessions, the November 90 put saw the second-largest increase in open interest, adding nearly 3,200 positions. Based on data from the major exchanges, these slightly longer-term speculators have also been buying to open contracts -- hinting at bearish near-term expectations for WYNN.

Now is a good time to purchase premium on short-term Wynn Resorts, Limited (NASDAQ:WYNN) strikes, too. The casino stock's Schaeffer's Volatility Index (SVI) of 52% ranks in the low 30th annual percentile, suggesting the options market is pricing in relatively modest volatility expectations at the moment. 

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