Wynn Resorts, Limited
) prepares to unveil its earnings after tonight's close, option
players are piling up on calls. Around 8,200 contracts have crossed
the tape thus far, or more than four times the average intraday
call volume. Meanwhile, fewer than 2,400 puts have changed hands.
Short-term speculators are honing in on the stock's 135 strike,
hoping that a strong quarterly showing will push the security north
of this overhead mark.
Diving right in... WYNN's May 135 call has seen 1,323 contracts
change hands, 78% at the ask price. Implied volatility was last
seen 2.5 percentage points higher, suggesting that some of today's
activity is of the buy-to-open variety. These out-of-the-money
calls are being purchased for a volume-weighted average price
(VWAP) of $3.34, meaning traders will profit with each step above
$138.34 (strike plus VWAP) Wynn Resorts takes through the close on
Friday, May 17 -- when front-month options expire. Delta for this
call is currently docked at 0.48, or 48%, suggesting a roughly
1-in-2 chance the option will be in the money ahead of expiration.
Meanwhile, option players are also scooping up the shorter-dated
weekly 4/26 135-strike calls for a VWAP of $2.10. A healthy portion
of these calls have crossed at the ask price, implied volatility
has surged 38.2 percentage points, and volume is outstripping open
interest, making it safe to assume new bullish positions are being
initiated. Breakeven for the calls is $137.10, or 2.2% above the
stock's current perch at $134.12.
Should Wynn Resorts fail to muscle above the $135 mark by the
options' respective expiration dates, the most both groups of
optimists have risked is the initial premium paid. However,
according to the stock's Schaeffer's Volatility Index (SVI), this
isn't much. Despite the company's impending earnings announcement,
the equity's SVI of 32% ranks lower than 95% of similar readings
taken in the past year. Simply stated, WYNN's short-term option
premium is relatively inexpensive at the moment.
Widening the sentiment scope reveals that today's campaign for
calls diverges from the
seen in WYNN's options pits. Throughout the course of the past 50
sessions, traders have bought to open 152 puts for every 100 calls
at the International Securities Exchange (ISE), Chicago Board
Options Exchange (
), and NASDAQ OMX PHLX (PHLX). What's more, the resultant put/call
volume ratio of 1.52 ranks higher than 98% of similar readings
taken in the past year, implying puts have been scooped up over
calls at a near annual-high clip in recent months.
On the charts, the equity has been guided higher by its 32-week
moving average since mid-November, with the shares up nearly 30%
from their Nov. 15 low of $103.34. More recently, Wynn Resorts has
put in a solid performance against the S&P 500 Index (
), and has bested the broad-market index by more than 7 percentage
points throughout the past 40 sessions.
As touched upon, the casino concern will unveil its quarterly
results after the market closes tonight. The company has a mixed
history in the confessional, falling short of bottom-line
expectations in three of the past four showings. However, the stock
experienced moves to the upside in the subsequent sessions
following each of its last two reports. For Wynn Resorts first
quarter, analysts are calling for a profit of $1.56 per share.
This article by Karee Venema was originally published on
Schaeffer's Investment Research
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