Shares of casino operator Las Vegas Sands (LVS) are up nearly 12 percent over the past year, amid a general market decline. However, one trader sees a drop ahead for shares going into the end of the year.
That’s based on the December 16th $44 puts. With 29 days until expiration, 7,035 contracts traded compared to a prior open interest of 258, for a 27-fold rise in volume on the trade. The buyer of the puts paid $2.48.
Shares recently traded for about $44.00, making this an at-the-money trade. Shares have a 52-week low of just under $29, which the stock traded at in late October before moving higher in the recent market rally.
The casino operator is still recovering from the pandemic, with a solid 17 percent rise in revenue in the past year. While the company sports a fantastic 47 percent profit margin, the company’s operating margin is negative, and a potential slowdown in tourism could further weigh on shares.
Action to take: Shares are conventionally expensive at over 106 times earnings. And those earnings are likely to continue to slide further in the months ahead with a slowing economy. Investors may want to hold back on buying shares until monetary policy starts to ease once again.
For traders, the puts offer some modest upside potential as an at-the-money trade. A mid-double-digit return is likely, especially if stocks once again decline in the weeks ahead.
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.