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Call buyers place bets on Pinnacle

Mike Yamamoto (mike.yamamoto@optionmonster.com)

Casino stocks have been ripping higher all year, and traders are looking for more gains in Pinnacle Entertainment.

About 1,400 January 27 calls were purchased this morning for $0.25 to $0.44, according to optionMONSTER's Heat Seeker tracking system. These are new positions, as there was no previous open interest in that strike.

These long calls lock in the price where the stock can be bought for the next month no matter how far it might climb. They could be sold earlier at a profit if premiums rise with a rally before then, but the contracts will expire worthless if shares remain below $27 through mid-January. (See our Education section)

PNK is gaining 1.32 percent to $25.39 today. The casino operator spiked higher after its last quarterly report in early November and has been grinding its way higher since. The stock bounced off its 50-day moving average at the $24 level a week ago and is now trying to break out.

Pinnacle shares are up more than 50 percent on the year. Casino operators as a group are up more than 90 percent this year, as seen on the screen shot below from our researchLAB market analysis tool.

Total option volume in PNK so far today is more than 9 times its full-session average for the last month. Overall calls are outpacing puts by 24 to 1, a reflection of the day's bullish sentiment.


(Graphic courtesy of researchLAB )


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