Penn National Gaming reports earnings tomorrow morning, and one
trader is betting that it will be a yawner.
optionMONSTER's tracking systems detected the sale of 1,450 August
40 puts for $1.35 and an equal number of August 40 calls for $1.65.
Volume was more than 30 times open interest in both strikes.
The transaction resulted in a credit of $3, which the investor will
get to keep if PENN closes at $40 on expiration. Gains will erode
to the upside or downside, and turn to losses below $37 or above
Known as a straddle, the strategy is a common way to bet on lower
volatility because if earnings are uneventful, premiums will fall
for both the calls and puts. (See our Education section)
PENN rose 1.13 percent to $40.38 yesterday. The gambling company is
up 15 percent so far this year, outpacing the performance of other
big U.S. casino operators like MGM Resorts International and Boyd
Earnings and revenue beat forecasts the last time it issued results
on April 21 and management raised full-year guidance. (See last
week's What's the Trade? column for more about positive employment
trends in the gaming sector.)
Overall options volume in PENN was 19 times greater than average