Trader wager on upside in MGM

By David Russell,

Shutterstock photo

MGM Resorts has been sprinting higher, and the bulls are in hot pursuit.

optionMONSTER's Heat Seeker tracking program detected the purchase of 15,000 March 22 calls for $1.94 and the sale of an equal number of March 19 puts for $0.28. Volume was more than triple open interest at each strike, indicating that new positions were initiated.

The trade cost $1.66 and is highly leveraged to gains in the Las Vegas-based casino company. Its delta is 0.74, meaning that it will appreciate $0.74 for every $1 that the stock advances, so a gain of 10 percent in the stock will inflate the strategy by some 50 percent. (See our Education section for more on how to amplify price fluctuations with options.)

MGM rose 0.66 percent to $22.87 yesterday and is up 22 percent in the last month. It now appears to be retracing the massive 2008 selloff that sent the stock from $80 to $10. Given the improving economy and its years of languishing under $20, some traders may think that it will continue to rally into early 2014.

Yesterday's trade pushed total option volume in the stock to almost 3 times average amounts, according to the Heat Seeker.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing Options
Referenced Stocks: MGM

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