Caesars Entertainment Corporation provides casino-entertainment and hospitality services in the United States and internationally. The company operates 38,000 slot machines and 2,700 table games, as well as other games. Caesars empire consist of 49 casinos, including 36 casinos in the United States and 13 casinos internationally with approximately 3 million square feet of gaming space, and 40,000 hotel rooms.
Several weeks ago Nevada's Gov. Steve Sisolak ordered a 30-day closure for all businesses, including the casinos turning the infamous Las Vegas strip into a ghost town. However, according to Barron’s Magazine, Caesars Entertainment has enough cash flow to get them through the next eight to 16 months.
Around that same time during the 30-day closure, I noticed the Smart Money was bought over 15,000 May 15th put options with strike price at $5.
Those same options have now up 3X.
Roughly 42 million people flock to Las Vegas each year. That’s about 3.5 million people each month. However, because of the shut down, Las Vegas is a ghost town. According to Las Vegas Convention and Visitors Authority, Las Vegas makes up about one-fifth of Southern Nevada’s gross domestic product (GDP) with tourism generating roughly $58 billion annually, while employing nearly 370,000 people. So Las Vegas went from 100 to 0 pretty quick.
There have been peace protests in Las Vegas calling for the re-opening. The Mayor of Las Vegas, Carolyn Goodman said being closed is and killing Las Vegas, their industry, their convention and tourism business and the longer it takes to re-open, the more impossible it will be to recover.
Now casino executive in Las Vegas are discussing ways to keep customers and employees safe upon re-opening. Some of the discussion center around customers and workers wearing masks and gloves, in addition to COVID-19 testing.
The Smart Money understands the pressure of not opening Las Vegas and the risks the longer "The Strip" is shut down. On Friday, CNBC's Option Action noticed unusual options activity in Caesars.
On CNBC's "Options Action," Tony Zhang said that he saw an interesting options trade on Friday in Caesars Entertainment CZR. He finds it interesting because it gives us a glimpse into how options traders might be utilizing strategies in options to time an eventual recovery in the casino stocks.
He noticed that 7,500 contracts of the May $9 calls were sold for 35 cents. Zhang explained that this is a bullish to neutral view, since the trade breaks even around 15% above the closing price on Friday.
The trader has also bought the June $9 calls for 80 cents and the June $11 calls for 20 cents. So the trader is betting that the stock is going to stay range bound in May and then move higher in June, said Zhang.
Based on the chart, the chart suggests there is nothing stopping price from moving higher until the daily demand at $10.25. The Smart Money was right on Caesars once, can they get it right again, stay tuned?
This post is my personal opinion. I’m not a financial advisor, this isn't financial advise. Do your own research before making investment decisions.
Posted via LeoFinance