LVS Analysis

Update 10/30/2015: LVS reached half of its maximum potential profit and I exited, eliminating time risk and freeing cash for other trades.

Shares rose by 5.0% over nine days, or a +120% annual rate. The options position produced a 60.4% yield on debit, for a +2,450% annual rate.

Note that this update initially was added in error to an analysis of a NOV-series LVS analysis, posted Oct. 12.

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The gaming and resort company Las Vegas Sands Corp. (LVS), headquartered in Paradise, Nevada, publishes earnings on Wednesday after the closing bell.

[LVS in Wikipedia]

LVS

I shall use the DEC series of options, which trades for the last time 58 days hence, on Dec. 18.

Ranges

Implied volatility stands at 45%, which is triple the VIX, a measure of volatility of the S&P 500 index. LVS’s volatility stands in the 69th percentile of its annual range.

Ranges implied by options and earnings

Week	SD1 68.2%	SD2 95%	Earns
Upper	55.74	64.22	50.99
Lower	38.78	30.30	43.53
Gain/loss	17.9%	35.9%

Implied volatility 1 and 2 standard deviations; maximum earns move
The Trade

I am bullish LLY based on analyst expectations, despite a preponderance over the last year of declines after earnings announcements.
Bull put spread, short the $45 puts and long the $42.50 puts,
sold for a credit and expiring Dec. 19.
Probability of expiring out-of-the-money

DEC	Strike	OTM
	45	57.0%

The premium is $0.77, which is 31% of the width of the position’s wings. The stock at the time of entry was priced at $47.25.

The risk/reward ratio is 2.3:1.

The strike price is $2.25 below the current price.The biggest immediate move after each of the past four earnings announcements was $3.73, and the average was $1.59.

Decision for My Account

I've opened a position in LVS as described above.

-- Tim Bovee, Portland, Oregon, Oct. 21, 2015

References

Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.

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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



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Based on a work at www.timbovee.com.