Traders up ante in MGM Resorts
Bullish traders were snapping up calls in MGM Resorts yesterday for the third time in less than a week.
optionMONSTER's Heat Seeker system identified the purchase of 4,000 May 22.50 calls for the ask price of $0.62 yesterday. This is clearly a new position, as previous open interest in the strike was a mere 87 contracts.
Last Thursday traders were buying the May 23 calls, followed the next day by bullish activity in the Weekly 22 and 22.50 calls that expire on May 29.
These long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. But the contracts can quickly lose value if the stock stalls or pulls back. (See our Education section)
MGM slipped 0.55 percent to $21.71 yesterday. The casino operator has trading sideways in an increasingly narrow range between a declining 200-day moving average and a rising 50-day line.
The company is expected to report earnings at the end of this month, though the release has not been scheduled. Management will hold its annual shareholder meeting on May 28.
Yesterday's total option volume in MGM was 50 percent higher than its daily average for the last month. Overall calls outnumbered puts by a bullish ratio of 7.5 to 1.
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