Option Activity Alert: WYNN, AVL, LLTC, GM

WYNN – Wynn Resorts, Ltd. – Options traders are placing bullish bets on the casino resort operator this morning with shares in Wynn Resorts surging 6.6% to an intraday- and more than three-year high of $135.59. Shares in the Las Vegas, NV-based company, which operates Wynn Macau in China, rallied sharply after casino revenue in Macau jumped 48% over the previous year, topping $2.5 billion in March. Options investors flocked to Wynn Resorts, as well as other casino resort operators with ties to Macau, right out of the gate this morning. Near-term bulls are dominating activity in Wynn’s options in the first half of the session, exchanging roughly 2.8 calls on the stock for each single put option. April contract calls are most active just before 12:00pm in New York, with overall options volume nearing 29,000 contracts against total open interest on WYNN of 140,493 contracts. Some bullish players picked up in-the-money call options, buying more than 1,100 calls at the April $130 strike for an average premium of $4.99 each, and purchasing some 1,400 call options at the April $135 strike at an average premium of $2.31 apiece. Near-term optimism spread to the higher April $140 strike where another 1,375 calls were scooped up for an average premium of $0.99 a-pop. Investors long the April $140 strike calls make money in the event that the casino operator’s shares rally another 4.0% over today’s high of $135.59 to surpass the average breakeven price of $140.99 by April expiration day. Finally, more than 1,800 call options changed hands up at the April $145 strike on open interest of just 256 contracts in the first half of the session. It looks like the vast majority of these calls were purchased at an average premium of $0.48 each. Call buyers at this strike profit in the event that WYNN’s shares jump 7.3% to exceed $145.58 at expiration. Wynn Resorts, Ltd. is scheduled to report first-quarter earnings after the closing bell on April 28, 2011, well past the expiration on April contract options.

AVL – Avalon Rare Metals, Inc. – Bulls picked up call options on the Toronto, ON-based rare metals and minerals exploration company today with shares in Avalon Rare Metals up as much as 8.3% this afternoon to a new 52-week high of $8.76, and rising. Early-bird call buyers taking bullish stances on AVL at the start of the session paid premiums at a substantial discount to current premiums required to buy the same contracts this afternoon. Investors this morning picked up around 2,500 calls at the April $9.0 strike for an average premium of $0.25 each. Later-to-the-game traders looking to buy the April $9.0 strike calls at 1:05pm, face an asking price of $0.50 each. More than 4,150 calls have changed hands at that strike this afternoon versus previously existing open interest of 2,707 contracts. Bullish sentiment on Avalon spread to the May $10 strike where some 1,300 calls traded on zero lots of open interest. Investors buying the calls paid around an average premium of $0.44 each earlier in the trading day, but these calls now cost $0.60 per contract. Options implied volatility on Avalon Rare Metals climbed 12.2% to 78.02% this afternoon.

LLTC – Linear Technology Corp. – It looks like some investors are building up bullish positions on Linear Technology Corp. today, with the semiconductor company’s third-quarter earnings report a little less than three weeks away. Shares in LLTC increased as much as 1.1% at the start of the session to touch an intraday high of $34.01, but relinquished most of the morning’s gains to stand just 0.15% higher on the day at $33.67 as of 1:20pm. Options players traded more than 8,200 calls at the April $34 strike, exceeding open interest of 5,926 contracts at that strike. Most of the calls appear to have been purchased by near-term optimists for an average premium of $0.49 per contract. Call buyers profit on the long-call position if shares in LLTC rise 2.4% over the current price of $33.67 to surpass the average breakeven point on the upside at $34.49 before the contracts expire in three weeks.

GM – General Motors Co. – The automaker said U.S. sales rose 9.6% in March, which came in below average analyst forecasts, but the discrepancy has not prevented shares in GM from rising sharply today. The stock is currently up 3.5% to stand at $32.11 as of 12:40pm in New York. Options traders have traded nearly 60,000 contracts on General Motors in early-afternoon trade, with more than 2.3 calls changing hands on the automaker for each single put option in action. April contract call and put options are attracting the greatest amount of trading traffic, followed by substantial volume in the May contract options. Meanwhile, it looks like fresh positioning in longer-dated calls is the work of a bullish player expecting GM’s shares to continue their upward trajectory through July expiration. The investor appears to have purchased 5,000 calls at the July $35 strike, on previously existing open interest of just 511 contracts, for an average premium of $0.88 each. The call buyer stands ready to profit in the event that shares in the auto manufacturer surge 11.7% over the current price of $32.11 to surpass the average breakeven price of $35.88 by July expiration. GM’s shares last closed above $35.88 back on February 18, 2011. The flurry of options activity in the stock today helped lift GM’s overall reading of options implied volatility 7.9% to 31.99% as of 12:55pm. General Motors Co. reports first-quarter results on May 17, 2011, before the market opens for trading.

About Andrew Wilkinson 1023 Articles

Affiliation: Interactive Brokers

Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.

Interactive Brokers: Interactive Brokers offers direct market access to around 80 electronic global markets from a single account. Successful traders and investors understand that superior technology and lower trading costs can result in greater returns. For 32 years we have been building direct access trading technology that delivers real advantages to professionals worldwide. With consolidated equity capital of US $4.4 billion, IB and its affiliates exceed 1,000,000 trades per day. In addition, our prudent and conservative risk policies make Interactive Brokers a safe haven for your money. Discover some of the reasons why IB, the largest independent US broker/dealer, is the professional traders' and investors' choice.

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