IB Options Brief: Las Vegas Sands Corp. (LVS) & FedEx Corp. (FDX)

Posted October 3rd, 2011 by Caitlin Duffy in Unusual Activity

LVS ñ Las Vegas Sands Corp.
Shares in Macao casino operators fell last week on concerns of slowing growth in China. The selloff in names such as Las Vegas Sands Corp. and Wynn Resorts Ltd. continued this morning, with shares in LVS sliding as much as 5.45% to $36.25 today. The stock got off to a rocky start, but shares in LVS have since fought their way back to rally 0.50% to $38.54 as of 12:30 pm EDT.

At least one options trader is positioning for the recovery story to continue to play out on LVS through October expiration. It looks like the investor effectively established two call spreads on the stock to prepare for limited gains in the price of the underlying. The bullish player appears to have purchased 1,000 in-the-money calls at the Oct. $35 strike for a premium of $4.10 each, purchased 500 calls at the Oct. $37 strike at a premium of $2.95 apiece, and sold 1,500 calls up at the Oct. $39 strike for a premium of $1.97 a-pop.

It may be easiest to consider the transaction in two parts. The 1,000-lot Oct. $35/$39 call spread cost a net premium of $2.13 per contract, and prepares the trader to accrue maximum potential profits of $1.87 per contract in the event that shares in LVS top $39.00 at expiration. The smaller portion of the trade, the 500-lot Oct. $37/$39 call spread at a net cost of $0.98 apiece, may yield maximum gains of $1.02 per contract with the stock up over $39.00 at October expiration. Options implied volatility on LVS is up 3.6% at 80.2% in early-afternoon trade.

FDX ñ FedEx Corp.
Put activity on FedEx Corp. this morning suggests one strategist is positioning for shares in the provider of transportation and business services to potentially slip to fresh multi-year lows by October expiration. Shares in FDX are currently down 1.3% to stand at $66.81 as of 11:40 am in New York.

The investor responsible for the bearish transaction appears to have purchased 3,000 puts at the Oct. $65 strike for a premium of $2.28 each, and sold the same number of puts at the lower Oct. $60 strike at a premium of $0.92 apiece. Net premium paid to initiate the spread amounts to $1.36 per contract, thus positioning the trader to profit should shares in FedEx decline 4.7% from the current price of $66.81 to breach the effective breakeven point on the downside at $63.64.

The investor may rake in maximum potential profits of $3.64 per contract on the position in the event that shares in FDX drop 10.2% to trade below $60.00 at expiration later this month. Fedexís shares recently secured a 2-year low of $64.55 on September 22, but have not traded below $60.00 since July 2009.

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