UPDATE: WYNN: Betting Against the House

by Dan June 29, 2011 11:17 am • Commentary

From the time I suggested this trade 3 weeks ago, the stock has basically gone from 141.70 down ~9% right back up to 141 current levels…..the spread was working very well and can now be sold for a .40 loss….. Friday on Options Action I suggested leaving it on when the stock was around 131 and the spread was worth over 6.00…well the stock has rallied 10.oo in less than 3 trading days and the move should clearly test your conviction on the trade…..

The stock has told us a couple things in the last few weeks, even-though it has been a great performer, it is not immune to getting caught up in a sell off…..holders clearly have their fingers on the trigger and you may want to look for a better entry point if you feel the market has bottomed near term…..another point is that when you had nice gains in ta trade like you might have had last week maybe look to take half off and give yourself a little room.

ORIGINAL POST June 7th 2011:

Yesterday on Fast Money I offered a Bearish trade structure on WYNN…..the stock is only 5% off the 52 week highs, still up 35% on the year and almost 90% in the past year……[private] company gets almost 70% of their revenues from Macau, if global growth slowing this will be a name severely impacted……China is doing everything in their power to tighten monetary policy to cool things down right at the time most thought we would be ready to do the same, yet it appears that our economy is slowing on its own….this can’t be good for Vegas and if China is successful in their own efforts it can’t be good for Macau.

I wanted to take a look at WYNN because of its great performance ytd and as I think the market will head lower this summer and eventually guys will take profits in strong names like this and I want to get in front of it….I think you would have to be crazy to outright short a name like this as short interest is high at about 4.5% of the float….but I think making a tactical bet with options by defining your risk makes sense….I want to look to August Expiration as it will catch earnings, any whiff of a slower revenue environment and this stock goes straight back to 120…..

[caption id="attachment_2440" align="aligncenter" width="300" caption="1 yr WYNN chart Provided by Bloomberg LP"][/caption]



WYNN $141.70
TRADE: look out to AUGUST EXPIRATION which will capture earnings…..
BUY the AUG 135 / 120 Put spread for 4.00
-Buy Aug 135 put for 6.60
-Sell Aug 120 Put at 2.60

Break-Even on Aug Exp:
Downside: 131…btwn 131 and 120 make up to 11, below 120 make full 11.00
Upside: stock above 135 lose all 4 or ~3% of the underlying…..