LVS - Elevated Vol, Popping Stock & GDP Revision

Discussion in 'Options' started by livevol_ophir, Nov 29, 2010.

  1. livevol_ophir

    livevol_ophir ET Sponsor

    LVS is trading $50.35, up 0.6% with IV30™ up 10.2%. The <a href="http://www.livevol.com/">LIVEVOL™ Pro Summary</a> is <a href="http://livevol.blogspot.com/2010/11/lvs.html">in the article</a>.

    <img src="http://www.livevolpro.com/help/images/blog/lvs_summary.gif" />

    This stock is up ~85% over the last 3 months. The revised GDP report last week demonstrated the consumer spending ticked up nearly 3%. Keep in mind the US consumers represent 70% of GDP. That ~3% jump was the fastest growth since Q4 of 2006 according to an article I found on Fool.com. <a href="http://www.fool.com/investing/general/2010/11/26/the-big-money-says-to-buy-las-vegas-sands.aspx">Click Here for article.</a>

    The article goes further to discuss institutional buying of the stock. Finally it mentions a Barron's article:
    "On the sentiment front, there was an optimistic cover story on the retail sector in Barron's last weekend, the first such bullish piece that we have seen in a long time."

    Ok, enough with that stuff. As of today LVS vol has popped passed HV20&#8482 and HV180™. Specifically:

    IV30™: 61.46
    HV20™: 54.51
    IV180™: 54.99

    The LVS Charts Tab is included (<a href="http://livevol.blogspot.com/2010/11/lvs.html">in the article</a>). The top portion is the stock price, the bottom is the vol (IV30™ - red vs HV20™ - blue vs HV180™ - pink).

    <img src="http://www.livevolpro.com/help/images/blog/lvs_charts.gif" width="600" />

    I've highlighted the popping IV30™. Note also the gap up on earnings back in the end of Oct.

    The Skew Tab snap (<a href="http://livevol.blogspot.com/2010/11/lvs.html">in the article</a>) illustrates the vols by strike by month.

    Note that LVS has weeklies. We can see a parabolic shape in the weekly and Dec monthly options. The upside is less pronounced in the Jan options, though it's slightly bid as well.

    Finally, let's look to the Options Tab (<a href="http://livevol.blogspot.com/2010/11/lvs.html">in the article</a>).


    <b>Possible Trades to Analyze</b>
    The one week straddle is priced at ~ $2.68 fair value... One week?...

    1. Sell the Dec 3 weekly 50 straddle @ 2.65. This sells 62 vol.

    2. Do #1, but purchase the Dec monthly 52.5 calls for $1.86. This yields a $0.79 credit and has no upside risk. Of course, the downside is naked short options.

    3. Do #2 but add a Dec weekly 49 put for $0.78. Net, this trade yields $0.01 credit, looks for upside moves in LVS after Dec 3 and snips the margin cost of #2. This trade loses pretty big if LVS goes down in the next week. Protection obviously starts at $48.

    4. Sell Dec weekly 48 put @ $0.47. This sells ~63 vol and bets that the stock holds up for the next five trading days. This is sort of a bet that the long institutional holders prop the stock up in the short-term while taking advantage of elevated vol. The Dec weekly 49 puts are a similar bet.

    This is trade analysis, not a recommendation.

    <b>Follow Live Trades and Order Flow on Twitter: @Livevol_Pro</b>

    Details, trades, prices, vols, skews, charts here:
    <a href="http://livevol.blogspot.com/2010/11/lvs.html">http://livevol.blogspot.com/2010/11/lvs.html</a>

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