Leisure spending has taken off during the past year, as the U.S. economy benefits from a modest recovery. The gaming sector has been a direct beneficiary of this rise in consumer spending, and we should see some direct evidence during the next week as several major players in the casino sector step up to release their quarterly earnings reports.

Las Vegas Sands Corp. (NYSE:LVS)

Headlining this influx of gaming sector earnings is Las Vegas Sands, which is scheduled to hit the earnings confessional after the close of trading this afternoon. The company has seen stellar organic growth, opening the doors to its newest Macau casino, the Sands Cotai, on April 11, and planning a potentially $35 billion Vegas-style strip in either Barcelona or Madrid, Spain.

As for earnings, Wall Street is expecting Las Vegas Sands to post a 56.8% spike in quarterly earnings to 58 cents per share. Revenue is seen soaring 21.8% to $2.57 billion. During the past four quarters, Sands has seen average year-over-year revenue growth of more than 39%.

On the sentiment front, LVS’ backdrop is leaning toward the bullish end of the spectrum. For instance, the brokerage community has doled out 17 “buy” ratings, compared to just three “holds” and no “sells.” Meanwhile, options traders are loading up on bullishly oriented calls, with the stock’s weekly April put/call open interest slipping to 0.84.

Peak call open interest for the April series arrives at the 60 strike, where 3,646 contracts currently reside. Another 2,507 calls are open at the April 57.50 strike, while about 2,000 reside at the April 62.50 strike. On the put side, some 2,870 contracts are open at the April 55 strike, with roughly 2,000 contracts at the April 52.50 and 57.50 strikes.

Technically, this week’s market turmoil has forced LVS to test key support at its 50-day moving average, which currently rests at $56.50. While LVS will likely beat Wall Street’s expectations, market turmoil or any unexpected hiccup in earnings could have a negative impact. As such, those looking to trade LVS ahead of earnings might want to consider an April 55-strike straddle using weekly options (simultaneously buying the 55-strike call and put). This trade was last asked for $3.33, or $333 per pair of contracts, placing breakeven at $58.33 on the upside (a 3.2% gain) and $51.67 on the downside (an 8.5% decline).

Continue reading for two more option trading ideas from the gaming sector…

Melco Crown Entertainment Ltd. (NASDAQ:MPEL)

Melco Crown Entertainment specializes in the red-hot Macau gaming market in China. Macau has been a gold mine for companies like Melco, with gambling revenue soaring 24% year-over-year in March. However, the pace of revenue growth appears to be slowing, as March growth was not as steep as last year. What’s more, Wells Fargo analysts believe that April revenue growth will come in at 22%, below the current consensus estimate (http://www.macaubusiness.com/news/gaming-revenue-for-april-may-fall-below-expectations/15769/).

Slowing growth should not affect Melco’s coming quarterly earnings report, which is slated to hit the Street on May 2, but it could have an impact on guidance. For the record, Wall Street is anticipating a profit of 17 cents per share for Melco, a massive improvement over the company’s profit of a penny per share last year. Historically, the firm has missed expectations twice and matched twice in the past year, resulting in an average downside surprise of roughly 13%.

Despite these potential warning signs, expectations appear to be quite high for Melco ahead of its quarterly report. The brokerage firm has handed out 15 “buys,” three “holds,” and just one “sell” on MPEL, while the stock’s front-month put/call open interest ratio of 0.27 indicates that calls nearly quintuple puts in the May series of options.

Technically speaking, some of this optimism is warranted. MPEL is up an impressive 61% so far in 2012, with the shares riding support at their 10-day and 20-day trendlines. However, the equity is currently on the verge of being overbought, with its 14-day RSI hovering just below 70. The stock is also facing potentially stiff overhead resistance in the $16 area – home to its August 2011 peak.

Guidance will be key for Melco when it reports next week. With high investor expectations, any misstep could send the stock sharply lower. That said, inline guidance and a better-than-expected quarter could fan the bullish flames. Once again, it appears that a straddle may be in order. Traders might want to consider a MPEL May 15 straddle ahead of earnings. This trade was last offered at $1.55, or $155 per pair of contracts, with breakeven arriving at $16.55 (a gain of 9.7%) and $13.45 (a decline of 10.8%).

Wynn Resorts, Limited (NASDAQ:WYNN)

Wynn Resorts, Limited, another heavy hitter in the gaming sector, has yet to officially set a date for its turn in the earnings limelight. Given past report dates, however, Wynn should be stepping up to the plate within the next week or so. When it does, Wall Street will be expecting a profit of $1.41 per share, which is a modest improvement over the company’s profit of $1.38 per share in the year-ago period.

The whisper number is set considerably higher at a profit of $1.51 per share.

That said, expectations are not quite as bullish across the board as the whispers would suggest. For instance, the brokerage community has room for improvement, with 11 of the 25 analysts following WYNN rating it a “hold” or worse. Additionally, the stock’s front-month put/call open interest ratio of 0.75 is pretty middle of the road given that WYNN options traders are typically much more call-heavy in terms of open interest.

WYNN’s technical backdrop may offer some insight into this lack of motivation from the bulls. Specifically, the shares have gained a mere 13% since the start of 2012, with WYNN spending much of the past two months bouncing around between support at its 50-day moving average and resistance at its 200-day trendline. The former is hovering near $123, while the latter trendline rests near $128, leaving WYNN with only about five points of wiggle room.

Luckily for WYNN bulls, earnings reports can provide excellent motivators. With WYNN’s expectations arriving below par compared to the rest of the gaming sector, the shares could be primed for a post-earnings surprise. As such, traders might want to consider a WYNN May 125/135 bull call spread. This trade was offered at $3.19, or $319 per pair of contracts, at the close of trading on Tuesday. Breakeven lies at $128.19, with a max profit of $6.81, or $681 per pair of contracts, achievable if WYNN closes at or above $135 when May options expire.

As of this writing, Joseph Hargett does not own any shares referenced here.