Shares of casino operator Las Vegas Sands (LVS) have shed nearly 40 percent in the past year. One trader sees further downside in the weeks ahead.
That’s based on the July $29 puts. With 37 days until expiration, 4,196 contracts traded compared to a prior open interest of 149, for a 28-fold rise in volume on the trade. The buyer of the puts paid $0.53 to get into the trade.
Shares recently traded just over $35, but have a 52-week low at $29. So the option will move in-the-money if shares break to a new low in the coming weeks.
The casino has lost money in the last year, and revenues are down 21 percent, as the company has yet to get back to pre-pandemic levels of traffic. However, on a recovery in the travel and tourism space, the company’s 41 percent profit margin makes it a potential winner.
Action to take: Shares can likely re-test their recent low in the coming weeks, so investors may want to hold off on buying shares until they drop under $30. Plus, the stock doesn’t currently pay a dividend.
For traders, the July puts are attractive. While they only have a few weeks to play out, they offer a low-cost way to hedge against a potential further market drop in the coming weeks.
At their low price, traders may want to look for high-double-digit gains or better… or even simply look to close out a smaller profit on a big down day for the market.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.