Melco Crown Entertainment gapped lower yesterday, and bullish
option traders piled in.
optionMONSTER's Heat Seeker monitoring program detected the
purchase of more than 19,000 January 15 calls, most of which priced
for $0.55. Volume was almost quadruple previous open interest at
the strike.
Those
long calls
lock in a price of $15 on the Macau-based casino company in the
next 1-1/2 months, no matter how high the stock goes. They could
generate tremendous leverage in a rally but will expire worthless
if shares don't reach the strike price. (See our
Education
section)
MPEL declined 7.71 percent to $14.19 yesterday but is up 20 percent
in the last three months. Yesterday's drop brought the shares back
to their 50-day moving average, which could have led traders
believe that the price was at a good entry point.
Total option volume was 16 times greater than average in the
session, according to the Heat Seeker. Calls outnumbering puts by a
bullish 9-to-1 ratio.
