Is Macau a Leading Indicator for Las Vegas?

08/05/2010 12:01 am EST

Focus: OPTIONS

Elizabeth Harrow

Financial Analyst, Schaeffer's Investment Research, Inc.

Call volume has jumped to 1.5 times the norm Wednesday on Las Vegas Sands Corp. (LVS), with about 35,000 of these bullishly oriented options changing hands so far. The stock's August 28 call is far and away the most active, with 12,299 contracts trading—54% at the ask price, implying they were most likely purchased. With just 8,400 call contracts in residence at LVS' August 28 strike, it's a safe bet that new positions are being opened here today.


Figure 1

The stock's price action certainly supports this upbeat options volume, with LVS tagging a new 52-week high of $28.32 earlier. The shares have already rallied more than 87% in 2010, buoyed by double-barreled support at their ten- and 20-week moving averages.


Figure 2
Click to Enlarge

Traders today are likely responding to the latest revenue statistics from Chinese gambling destination Macau. Data from the Gaming Inspection and Coordination Bureau indicates that gross gambling revenue surged 70% in July on a year-over-year basis, and rose 20% on a month-to-month basis.

If LVS continues to tag new highs, an unwinding of bearish bets could provide fresh buying pressure for the shares. Currently, a healthy 14.3% of the equity's float is sold short.

By Elizabeth Harrow, contributor, Schaeffer’s Trading Floor Blog

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