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Option Writer Portfolio - September

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Las Vegas Sands Corp. (LVS) owns the Venetian and Palazzo resort/hotel/casino and the Sands Expo and Convention Center in Las Vegas, Nevada. LVS also owns The Sands Macao Casino in Macao, the People's Republic of China (PRC). The company's casino resorts include hotels, exhibition and conference facilities, casinos, showrooms, shopping malls, spas, restaurants and entertainment facilities, expo and convention centers, and other attractions and amenities, as well as public common areas.

On Friday, the casino operator took a hit after Banc of America Securities analyst Shaun Kelley downgraded the stock to "sell" and said the casino operator has greater funding needs than investors may recognize. However, the stock only dropped about $0.60 on the news indicating that the negative effects from the economy had already been priced into the stock. As of 2:45PM EST the stock is up $0.90 at $41.23. I actually spent the last four days at the Palazzo and found that there was a lot more traffic in the Venetian and Palazzo than the other casinos I visited. As you may know, I like to play poker and blackjack a lot. Even though Wynn has better rules to play by they also use automatic "continuous" shufflers that most people dislike. LVS' properties don't use continuous shufflers but use 8 decks. That is a long time to wait for a new shoe. Most people that I spoke with were having a good time and agreed that the rooms were fanastic. LVS was packed all weekend and even early Sunday morning. I didn't see too many people, myself included, winning either. And I will be going back for my 1st quarter gaming analysis in January.

If you read my Market Wraps and Wednesday commentary you know I like to trade the opposite. Therefore, I see a buying opportunity on LVS because it is up on a big down day in the markets and the negative news seems to be priced in. Plus the max return is 36% while the stock is 15% out of the money. Obviously this trade is riskier than some others we will be doing. That is why we will be selling the 50 or 55 Septeber calls as a hedge once the stock bounces up to around $45, or the 8 day moving average (see chart below). The recent support is at Friday's low of $39.35. After that the 78.6% Fibonacci retracement at $36.68 comes into view as the next support level. LVS may actually fill into that level before making any real recovery. If you are risk adverse you should open (sell to open) half here and the remaining half at $36.45 - $36.70. However, if you open your entire allocation now a break and close below $36.65 will be the technical stop level.

Risk Management for LVS
Strike Stop = $ 35.00
Cost Basis Stop = $ 33.63
Technical Stop = $ 44.70
% Above the Strike 14.86%

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