Casino operator Caesars Entertainment surged with bullish option activity yesterday after New Jersey Governor Chris Christie said he would support a 10-year trial period for online betting in the state.
More than 2,700 March 10 calls traded in a strong buying pattern as premiums rose sharply from $0.25 to $1 through out the day, according to optionMONSTER's Heat Seeker system. The volume was more than 7 times the strike's open interest of 378 contracts before the trading began, indicating new activity.
The long calls lock in the price where traders can buy the stock and can provide substantial leverage if the stock keeps rallying through mid-March. But if CZR falls back below the $10 strike price, these options could expire worthless.
CZR spiked higher by 18.61 percent to $10.07 yesterday, its first close above the $10 mark since early July last year. The surge broke the stock out of a tight range in place for the last two months, taking shares well above their 200-day moving average.
Christie vetoed a measure that would have allowed online gambling in 2011 but is now working on revised legislation aimed at addressing the declining revenues of casinos in the state. Caesars has four casinos in Atlantic City, making it the largest operator there.
Total option volume in the name reached 5,000 contracts yesterday, 11 times its daily average in the last month. Calls outnumbered puts by more than 7 to 1, reflecting the session's bullish sentiment.
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