MGM receives vote of confidence

optionMONSTER

MGM Resorts has climbed to five-year highs, and one large trader is selling long-term puts in the casino operator.

The big action was in the January 2015 20 strike, where 7,500 puts were sold them for the bid price of $3.20, according to optionMONSTER tracking systems. The volume was more than double the strike's previous open interest of 3,078 contracts, clearly showing that today's trade is a new position.

The put seller will keep the $3.20 credit as profit if MGM holds above $20 through the next 15 months. If it falls below that level, he or she will face the obligation to buy shares at an effective price of $16.80 when that credit is included. Traders sometimes sell puts in the hope that the stock will pull back so that they can purchase shares at a discount in this way. (See our Education section)

MGM is down 0.64 percent to $20.05 in early afternoon trading. The stock closed yesterday at $20.18 and hit an intraday high of $20.30, both its highest levels since October 2008.


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