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Bull call spread on LVS looks for Q3 earnings to impress

Bull call spread on LVS looks for Q3 earnings to impressLas Vegas Sands Corp. (NYSE:LVS) – Casino stocks are popping today in sympathy with Wynn Resorts Ltd. after that company posted better-than-expected third-quarter earnings, announced plans to double its regular quarterly dividend and declared a $7.50 a-share special cash dividend. Las Vegas Sands Corp., which is scheduled to release third-quarter results tomorrow, rallied as much as 4.5% on Thursday morning to hit $46.30 in the early going. One options player appears to be positioning for further near-term upside with the purchase of a bull call spread in the newly issued weekly options that expire one week from tomorrow. It looks like the trader purchased a 400-lot Nov. 02 ’12 $47.5/$50 call spread for a net premium of $0.54 per contract. The strategy makes money if shares in LVS increase 5% from the current level of $45.70 to top the effective breakeven point at $48.04, with maximum potential profits of $1.96 per contract available on the position should shares surge 9.4% to hit $50.00 by expiration next week.

Crocs, Inc. (NASDAQ:CROX) – Shares in plastic-clog maker, Crocs, Inc., are getting slammed today after the company’s fourth-quarter top and bottom line estimates came in lower than analysts expected. The stock is down more than 20% at $12.89 as of 12:05 p.m. in New York. Crocs reported better-than-expected third-quarter profits after the final bell on Wednesday, but missed expectations for revenue in the quarter. Front month put activity on CROX this morning suggests one or more traders are holding out hope for a mild recovery in the shares in the near term. The sale of around 1,800 puts at the Nov. $13 strike provides an average premium of $0.32 per contract to sellers, who keep the full amount of premium as long as shares in the shoe maker exceed $13.00 at expiration next month. The puts were sold within the first couple of minutes of the opening bell this morning when shares had yet to reach their lows of the session. As such, the roughly three-hour old position is certainly not working out so far given premium on the put options has nearly doubled since this morning to $0.60 apiece in early-afternoon trade. Shares need only rise fractionally in the next few weeks in order for put sellers to walk away with premium of $0.32 per contract.

Ford Motor Company (NYSE:F) – Buyers of weekly calls on automaker, Ford Motor Co., yesterday are, in some cases, sitting atop significant paper profits on Thursday, with shares trading up as much as 3% earlier in the session to an intraday high of $10.49. We noted heavy call buying in the weekly options on Wednesday morning, pointing out the purchase of roughly 7,800 of the Oct. 26 ’12 $10 strike call within 10 minutes of the opening bell. Trading traffic in the $10 weekly calls continued throughout Wednesday’s session, driving open interest at that strike up by approximately 12,000 lots overnight to 14,521 from 2,843 contracts, with most of the fresh volume purchased for an average premium of $0.22 apiece. The sharp rally in Ford’s shares this morning markedly increased the value of call buyers’ positions, with premium on the $10 weekly call options rising to as high as $0.49 each at the start of trading on Thursday. These contracts have one full trading day remaining until expiration. As of 12:45 p.m. ET, call volume of around 1,750 contracts at the Oct. 26 ’12 $10 strike indicates most call buyers have yet to take profits on these positions. Traders could lose the full amount of premium paid for the options should Ford’s shares reverse course ahead of the weekend to settle below $10.00 at expiration tomorrow.

Caitlin Duffy
Equity Options Analyst

The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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