Options Trading News

January 25, 2013  Fri 11:23 AM CT

An enormous trade is looking for volatility rise in shares of MGM Resorts.

More than 54,000 MGM options have traded today, already more than quadruple its full-sessioni average in the last month. Most of that volume is in one print in the February 13 puts.

A trader bought 40,000 of those contracts for the ask price of $0.37, according to optionMONSTER systems. The volume was about 4 times the previous open interest in the strike, so this is a new position.

Less than a minute later, a block of 1.88 million shares of MGM was bought for $13.0133. The combination of stock and options creates an overall delta-neutral position that is looking for a break from the stock's low volatility of late. The current 10-day historical volatility for MGM is 20 percent, near 52-week lows. (See our Education section)

MGM is flat on the session at $12.97 this afternoon. Shares of the casino operator have traded in an increasingly tight range around this $13 level in the last couple of weeks. The stock was down near $9 in mid-November.
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As I stated in last week's article, a break out or a break down needs to have a couple things happen before it is considered a confirmed break out or break down. The only problem is that in today's market where things move much more quicker than they did just a few years ago, two days could wind up being the majority of the expected movement, if not the whole movement.

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