Traders doubled their money in downside option positions on Wynn Resorts today.
On July 7, Investitute’s tracking systems found that 1,500 Weekly $133 puts expiring this afternoon were purchased for $2.23 as part of a bearish ratio spread. This was clearly a new position, as open interest in the strike was only 220 contracts before the activity appeared.
Today those puts traded for $4.42, doubling in value one week later. The stock declined 3.2 percent in that time frame, showing how options can far outperform their underlying shares.
Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.
WYNN fell 3.38 percent to close at $130.42 today after a top prosecutor in Macau was convicted of corruption and a Daiwa analyst warned that junkets to the gambling destination could suffer from efforts to curb money laundering.
The casino operator gapped down from about $135 at the open but bounced sharply by midday, as Investitute cofounder Jon Najarian noted on CNBC’s “Halftime Report,” citing heavy call buying in Wynn and Melco Resorts & Entertainment this morning.