Market Overview

Options Traders Make Aggressive Bearish Bets On Near-Term Casino Stock Weakness

Options Traders Make Aggressive Bearish Bets On Near-Term Casino Stock Weakness

Casino stocks have traded mostly in line with the overall market so far in 2019, but a pair of unusually large options trades on Thursday morning suggests at least one trader is placing a bet that the winning streak will soon be over for casino stocks.

The Trades

On Thursday morning around 10:54 a.m., Benzinga Pro subscribers were alerted to a purchase of 500 Wynn Resorts, Limited (NASDAQ: WYNN) put options at a $117 strike price that expire on Friday. The puts were purchased at the ask price of $1.187 cents and represent a $59,350 bearish bet that Wynn shares will finish the week below $115.82.

At around 11:28 a.m., a trader sold 3,000 MGM Resorts International (NYSE: MGM) call options at a $28 strike price that expire on June 21. The calls were sold at the bid price of 46 cents and represent a $138,000 bearish bet that MGM will be trading below $27.54 by the end of next week.

Options Insight

Even traders that focus exclusively on the stock market watch the options market closely to gain insight into what option traders may be thinking. Due to the relative complexity of the options market, options traders are generally seen as more sophisticated than the typical stock trader. Large options traders are often institutions or wealthy individuals that may have a unique perspective and/or advanced information on a given stock.

Negative Trade War Headlines Ahead?

Casino stocks with exposure to the Macau, China market have been mostly trading on trade war news so far in 2019. Interestingly enough, Wynn is the U.S. casino stock with the most exposure to Macau, while MGM has much more overall exposure to Las Vegas than Macau. Still, casino stocks typically trade in tandem, and any negative headlines about U.S.-China relations will likely drag down all the tickers with exposure to Macau.

Both options contracts expire prior to the next monthly gaming revenue report from Macau due out on July 1 or Wynn and MGM’s next earnings reports, which are expected out on July 31 and Aug. 1, respectively. This near-term nature of the trading indicates the trader is potentially more concerned with trade war headlines than market fundamentals.

Unfortunately, there’s no way to be 100% certain whether the buys are a standalone position or a hedge against a larger stock holding. Given both of Thursday’s trades mentioned above were under $140,000 in size, they are unlikely to be hedges in this instance.

Related Links:

Bullish Semiconductor Options Trades Suggest Trade War Fears Might Be Overblown

How To Read And Trade An Options Alert

Posted-In: Short Ideas Options Top Stories Markets Trading Ideas Best of Benzinga


Related Articles (WYNN + MGM)

View Comments and Join the Discussion!

Cheetah Mobile Q1 Earnings Outlook

Patterson-Uti Energy Shares Higher On Pressure Pumping Divestment Update