OptionsHouse

Options Trading News

July 15, 2013  Mon 12:20 PM CT

MGM: SEE CHART GET CHAIN FIND STRATEGIES
Traders are rolling the dice with casino operator MGM Resorts.

optionMONSTER's Heat Seeker monitoring system detected the purchase of 3,500 December 18 calls for about $0.65 and the sale of an equal number of December 13 puts for $0.50 today. Volume was more than twice the previous open interest at each strike, indicating that new positions were opened.

Owning calls lock in the price where shares can be purchased, while selling puts generates income and creates an obligation to backstop other investors if the stock tanks. Combining the two strategies is essentially a cheap way to get long the shares.

For instance, he or she paid $52,000 and now controls the equivalent of roughly 175,000 shares. Buying that much stock with common equity would cost more than $2.7 million. Nonetheless, the position does include downside risk and can lose much more than the initial outlay. (See our Education section)

MGM is trading at $15.74 this afternoon, up 3.15 percent on the session and 36 percent so far this year. In addition to a strong earnings report in May, the company has benefited from investor sentiment supporting consumer-discretionary stocks and companies related to travel. (See our researchLAB market scanner for more.)
Share this article with your friends


Related Stories

MGM

Trader shows support for MGM Resorts

September 13, 2016

The casino operator has been range-bound recently, and one trader is betting that shares will hold their ground through early next year.

MGM

Momentum trades place bets on MGM

September 7, 2016

The casino operator is up 4 percent in the last week, and short-term traders are wagering that the uptrend will continue.

OptionsHouse

TRADING WEEKLY OPTIONS

The fastest money in the market
View full report »

Premium Services

Education & Strategy

Continue to melt up? Think debit call spreads

The U.S. equities market is continuing to melt up. Even though the labor market is stagnant, the Fed keeps hinting that a short term interest rate hike is coming sometime soon.

View more education articles »