Pinnacle Entertainment draws a hedge
Mike Yamamoto | [email protected]
optionMONSTER's Depth Charge tracking system detected the purchase of 3,000 March 15 puts in less than 2 minutes on Friday, led by a block of 2,683 that went for $0.85. There was no open interest in the strike at the start of the day, so this is fresh buying.
Shares of casino operator Pinnacle soared 21.35 percent to close at $16.20 on the $869 purchase of Ameristar, which saw its stock surge more than 20 percent as well. PNK had already been trending higher since July, when rebounded from support around 52-week lows near $9.
Investors apparently believe that the ASCA acquisition will boost Pinnacle's bottom line while cutting costs. Because PNK ran so high on the news, Friday's puts were likely purchased as a protective hedge on a long position in the shares rather than making a straight bearish bet.
These options lock in the price where the stock can be sold even if it crashes, but they will expire worthless if the shares are above the $15 strike price at expiration in mid-March. (See our Education section)
Friday's trading pushed total option volume in PNK to 6,191 contracts, 91 times its daily average in the last month.