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Betting Against Wynn Resorts as China Hedge

Today I am buying January $160 and $140 puts on Wynn Resorts (WYNN).  I am putting on this trade as a hedge against weak economic data coming out of China.  Weak by Chinese standards at least.  The Chinese market is already down a lot.  I think that reflects growing risk of a sharper than expected slowdown in Chinese GDP.  If that occurs, an obvious risk is to gaming in Macau and, secondarily, Singapore.  In addition, I think WYNN’s chart looks tired.  It is trading below the 50 day moving average and the 200 day moving average is not far below.

I am using puts to limit my capital risk.  January gives me time to get some capital out of the trade if I am wrong and WYNN moves higher against me.  Using $160 and $140 strikes gives me alternatives in the short-term due to the differing deltas.

Finally, I am adding this short exposure to help manage my overall portfolio net long exposure.  Recent trades where I bought back short calls and added to DirecTV (DTV) brought my net long above where I’d like to be.


Disclosure:  Positions mentioned above are in the Entermedia Funds.  Steve Birenberg is co-portfolio manager of the Entermedia Funds, long short equity hedge funds focused on media, entertainment, communications, and related technologies.  Steve also owns a stake in Entermedia’s investment management company and has personal monies invested in the Funds.

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