Two months ago I mentioned the rally that the casino stocks had enjoyed for a few weeks and we made some great trades during that time frame going long. However, many of our trades were stopped out as the sector fell out of favor with Wall Street and the casino stocks went on to hit rock bottom from there.
From November 10:
“There seems to be no good news in site for the casino stocks. On October 23, I had mentioned that the sector has been battered and bruised and it’s unbelievable how low some of these stocks have gotten. We used the weakness to play a two-week rally and made some tremendous profits along the way.
Before the opening bell this past Monday, I had said to place stops on all of the casino plays as they had enjoyed a nice rally. Here is what I said before the opening bell: If you are in any of these positions, scale back on the November calls by closing 50%-75% of your contracts and at least half of your January positions. The ride has been fun but you have to protect your profits and start preparing for the next trades.”
Well, the sector made up for lost ground yesterday when an analyst said New Year’s may have been better than expected for Las Vegas casinos.
On November 10, I had also mentioned some LEAP option plays on three of them with entry prices that were outlined from the original blog. Most of these positions could have been entered near the end of November if you kept them on your Watch List.
Las Vegas Sands (LVS, $8.48, up $1.39) was trading for $7 at the time and hit a low of $2.89 on November 21 & 24. I had mentioned that $2.00-$2.25 would be our ideal entry price for the January 2010 10 calls (LNUAB, $3.40, up $0.90). That persistence paid off as the stock soared nearly 20% on Monday. The options did even better as they gained 35%. Set stops at $3.00 to ensure a 50% profit.
MGM Mirage (MGM, $16.10, up $0.66) was trading at $12.32 and hit a low of $8 the day before Las Vegas Sands made its new 52-week low. The January 2010 10 calls (YDMAX, $6.70, up $1.70) were at $5.75 and you should have gotten into these for $4.50 or lower. Set stops at $6.25.
Wynn Resorts (WYNN, $52.30, up $4.88) added 10% on Monday and was going for $46 back on November 10. By Thanksgiving, the stock was below $30. The January 2010 40 calls (YPWAH, $18.00, up $2.00) could have been purchased for $10 or better. Set stops at $15.
To read the blog from November 10, click here.
Let’s see if the rally can continue. Although traffic in Las Vegas was better-than-expected, it’s sister, Atlantic City, was dismal before Christmas. Nobody was there it seemed like.
Rick Rouse
Rick@OptionsMentoring.com
