MGM Resorts draws downside wager

optionMONSTER

MGM Resorts has been range-bound all year, but one trader is positioning for shares to drop by summer.

optionMONSTER's Depth Charge system detected the sale of 10,341 April 14 puts mostly for $1.85 and the purchase of the same number of June 14 puts, with most large blocks going for $2. Volume was below the previous open interest in the April contracts, which expired at the end of last week, and above it in the May strike.

This indicates that an investor is rolling a long-put position forward to stay in the trade for another two months. The puts, which lock in the price where traders can sell the stock regardless of how far it might fall, could be hedging a long position or simply betting that MGM will drop by expiration in mid-June. (See our Education section)

MGM rose 1.41 percent on Friday to close the week at $12.23, just below its 100-day moving average and at the low end of a tight range in place since the beginning of the year. The casino operator is scheduled to announce first-quarter results on May 2 before the market opens.

Total option volume in MGM surpassed 39,400 contracts on Friday, nearly quadruple its daily average for the last month. Puts outnumbered calls by more than 3.5 to 1.


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