It was only a matter of time before the casino stocks got a lift. The sector has taken a beating as consumers continue to cut back on everything as the ongoing housing downturn, diminishing credit, rising food costs and recession worries continue. Gambling was taking a back seat to all of the aforementioned issues but not today.
Last Thursday I mentioned a slew of casino stocks that looked good for a trade as many of the stocks had fallen 50%-75% off their 52-week highs. The short sellers are in the market today buying back stock as many of them are getting “squeezed”.
A short squeeze happens when a stock starts to rise rapidly and the short sellers want to get out. Supply and demand comes into play when short sellers start to cover and for many of these casino stocks that is what appears to be happening. There was some good news that came out of the sector today which was enough for short sellers to start buying back the stock. The price of a stock can be pushed even higher if there aren’t enough shares to go around.
Here is the list from last Thursday with a few LEAP options I had mentioned. I have also listed some November options that did well today.
Las Vegas Sands (LVS, $8.91, up $3.96)
November 10 calls (LJJKB, $1.70, up $1.25, or 277%)
January 2010 10 calls (LNUAB, $4.60, up $2.39, or 108%) — these calls do not expire until January 15, 2010.
MGM Mirage (MGM, $13.75, up $3.42)
November 10 calls (MGMKB, $4.70. up $2.75, or 141%)
January 2010 10 calls (YDMAX, $8.50, up $4.40)
Wynn Resorts (WYNN, $41.05, up $8.17)
November 40 calls (UWYKH, $8.00, up $5.65, or 240%)
January 2010 40 calls (YPWAH, $15.20, up $5.00, or 49%)
Boyd Gaming (BYD, $5.63, up $1.25)
November 5 calls (BYDKA, $1.05, up $0.80, or 320%)
January 5 calls (WWAAA, $2.50, up $0.90, or 56%)
Pinnacle Entertainment (PNK, $4.42, up $1.67)
The trading volume for the options on Pinnacle are thinly traded, that is why I didn’t list them. The November calls for these stocks could trade higher by the time they expire and are worth a small gamble. However, I believe the January 2010 call options for these stocks are compelling.