2 Booming Casino Stocks With Cheap Options

WYNN stock is trading at levels not seen since early 2015

Sep 1, 2017 at 11:52 AM
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Casino stocks are on the rise, after data showed a 20% rise in Macau gaming revenue for August, even after two deadly typhoons hit the city. This positive price action isn't new for the sector. Per data from Schaeffer's Senior Quantitative Analyst Rocky White, the average year-to-date return of the nine "gaming" stocks we track is around 72% - one of the highest on our internal sector scorecard. And not surprisingly, options traders are blasting heavyweights Las Vegas Sands Corp. (NYSE:LVS) and Wynn Resorts, Limited (NASDAQ:WYNN), with most of the action happening on the call side.

Bearish Options Traders Could Boost Las Vegas Sands Stock

LVS call options are trading at two times the average intraday rate today, though volume is relatively low across the individual strikes. More broadly, options traders have been buying to open puts over calls on Las Vegas Sands at an unusual pace in recent months, per the stock's 50-day put/call volume ratio of 1.03 at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) -- in the 95th annual percentile. 

This skepticism is surprising, given LVS' long-term technical prowess. The shares are up nearly 18% year-to-date, with a pullback from their mid-June two-year high of $66.22 quickly contained by the rising 120-day moving average. Plus, with the security up 1.1% today to trade at $62.90, it is trading above recent resistance in the $62.25 region. A capitulation from some of the weaker bearish hands could create tailwinds for the equity.

Regardless of whether traders are targeting calls or puts, it's a prime time to purchase premium on the stock's options. Las Vegas Sands' Schaeffer's Volatility Index (SVI) of 20% ranks in the 7th annual percentile, and its 30-day at-the-money implied volatility (ATM IV) of 20% is docked below 97% of all comparable readings taken in the past year -- suggesting low volatility expectations are being priced into short-term options.

WYNN Stock Options Traders Target New Highs

Roughly 19,250 calls and 11,000 puts have changed hands on Wynn Resorts so far today -- three times what's typically seen, and volume pacing in the 98th annual percentile. Buy-to-open activity has been detected at the weekly 9/1 144-strike and September 140 calls, as options traders look for WYNN to continue today's positive price action over the next several weeks.

At last check, WYNN stock was up 3.3% to trade at $143.61, and earlier hit $144.75 -- its highest mark since February 2015. Longer term, Wynn shares are boasting a 67% year-to-date gain -- one of the best among S&P 500 Index (SPX) stocks -- and recently broke out above the $138-$140 region, which had contained the equity since June.

What's more, short-term WYNN options are attractively priced at current levels, per the security's SVI of 25% -- in the 8th annual percentile. Echoing this, Wynn Resorts stock's ATM IV of 25.2% ranks in the highest percentile of its annual range.
 

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