Financial

Las Vegas Sands Stock Lures Bullish Options Traders

Amid a slower-than-expected rebound in Macau, Vegas Sands (NYSE:LVS) stock is languishing. But some options traders see an upside opportunity. Vegas Sands is the largest operator in Macau.

Las Vegas Sands’ Venetian Macau, seen above. Options traders are betting on upside for the stock. (Image: Bobby Yip/Reuters)

The largest publicly traded gaming company by market capitalization is down 14.13 percent year-to-date. That’s one of the worst performances among US-listed casino stocks. Even with a pop today, the Sands Macau operator is on pace to finish June with a double-digit slide and is on pace for its fifth consecutive weekly decline.

While Macau’s recovery from the coronavirus pandemic is proving painfully lethargic for gaming executives and investors alike, some market participants aren’t throwing in the towel on LVS stock just yet.

Over in the options pits, calls have been more more popular than usual,” according to Schaeffer’s Investment Research. “This is per LVS’ 10-day call/put volume ratio of 13.64 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio stands higher than 92% of readings from the past year, indicating calls being picked up at a faster-than-usual rate in the last two weeks.”

Calls are the options contracts traders purchase when they are comfortable betting the underlying security will appreciate in value. Puts are bought in anticipation of that security’s prices declining. In other words, data cited by Schaeffer’s implies overtly bullish positioning in Sands options.

Catalysts for LVS Stock

With the pending sale of Venetian, Palazzo, and the Sands Convention Center on the Las Vegas Strip, LVS will soon have no assets in the US, at least temporarily.

The operator has derived the bulk of its earnings before interest, taxes, depreciation and amortization (EBITDA) and revenue from Macau — where it runs five integrated resorts — and Marina Bay Sands in Singapore. That means LVS stock is tethered to Macau recovery, which has moved in fits and starts because of the gaming hub’s zero-tolerance policy regarding new COVID-19 cases.

That’s hampered travel with the nearby Guangdong province and Hong Kong, both vital arteries in terms of Macau arrivals. Some good news may be emerging on that front, as JPMorgan analysts speculate Macau may be working with Hong Kong to loosen travel restrictions.

“Our checks with some Macau hotels suggest the government sent out a notice a few days ago on a planned reopening of the border,” noted JP Morgan analysts DS Kim, Derek Choi, and Livy Lyu.

LVS Stock Calm for Now

Data referenced by Schaeffer’s indicate that, for now, Sands shares aren’t overly volatile.

“The stock’s Schaeffer’s Volatility Index (SVI) of 35% stands higher than just 12% of all other readings in its annual range. This implies that options players are pricing in relatively low volatility expectations at the moment,” according to the research firm.

Near-term catalysts for the stock, beyond resumption of normal travel to Macau, could include acquisitions or the resumption of its once lofty dividend that was suspended to conserve cash during the pandemic.

Todd Shriber

Gaming Financials, Casino Business----Todd Shriber got his start in financial markets as a reporter with Bloomberg News. Later, he became a trader at a Southern California-based long/short hedge fund, where he specialized in trading sector and international ETFs leading up to and during the financial crisis. Currently, he analyzes, researches, and writes on ETFs for a variety of Web-based publications and financial services firms. Shriber has been quoted in Barron's, CNBC.com, and The Wall Street Journal. His work has been published on sites such as Benzinga, ETF Daily News, ETF Trends, MarketWatch, Fox Business, and Nasdaq.com. He joined the Casino.org news writing team in 2019, and lives in Southern California, where he enjoys golf and taking his black lab to the dog park. When in Las Vegas, he likes to wager on college football, the NBA, three-card poker, and roulette, even though he knows better. Email: todd.shriber@casino.org

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Todd Shriber