Unusual Options Activity: Las Vegas Sands (LVS)

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  • A big, bearish trade implies more downside for the casino from here.

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  • At least one trader is betting on a big decline in casino firm Las Vegas Sands (LVS).

    On Tuesday, a large number of contracts traded on a December $40 put option. With shares currently trading around $55, which implies a 25 percent decline in shares between now and the end of the year for the put option to pay off like a winning slot machine.

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    The contract had over 1,360 trades, against an existing volume of just over 200 contracts.

    Shares of the casino have traded as high as $81 in the past year. A slowdown in gaming revenues this year have led to weakness in shares. Gaming revenue can be tied to international tourism, which has taken a hit with trade war fears. Add in the uncertainty on the domestic economy, and the growth has been slow.

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  • However, the casino company has seen shares rise and fall rather quickly, so this option trade could have been made with a quick score in mind.

    Action to take: Consider buying shares of Las Vegas Sands under $50.00. Even with the slowdown, shares would pay a 6 percent dividend yield at that price, and would trade for less than 15 times earnings, a reasonable multiple here.