MGM – MGM Resorts International – The biggest casino operator on the Las Vegas Strip attracted a number of options traders today after the firm posted a third-quarter loss of $0.72 a share ahead of the opening bell this morning, which was consistent with MGM’s preliminary earnings report released last month. Shares of the operator of casino resorts jumped 7.5% in the first half of the trading session to secure an intraday high of $11.99. Investors are heavily favoring call options on the stock, with the majority of trading traffic occurring in the November and December expiries. Near-term optimists picked up more than 5,800 now in-the-money calls at the November $11 strike for an average premium of $0.90 each, and purchased another 5,800 lots at the higher November $12 strike at an average premium of $0.39 apiece. More than 8,700 call options were scooped up at the November $13 strike at an average premium of $0.15 a-pop. Investors holding the November $13 strike calls profit if MGM’s shares surge 9.7% over today’s high of $11.99 to surpass the average breakeven price of $13.15 by expiration day. Bulls also looked up to the November $15 strike to take ownership of more than 1,300 deep-out-of-the-money calls for an average premium of $0.035 per contract. Volume is heaviest at the December $14 strike where more than 43,000 calls changed hands by 12:30 pm. It looks like options players purchased at least 29,500 or those calls for an average premium of $0.26 each. Investors buying up these contracts stand ready to profit in the event that the casino operator’s shares jump 18.9% to trade above the average breakeven price of $14.26 by December expiration. Bullish call buying at this strike is not an entirely novel strategy, as the majority of the 14,661 calls representing open interest at the December $14 strike appear to have been purchased for an average premium of $0.16 apiece back on September 22, 2010. Investors are currently exchanging more than 4.6 call options on MGM Resorts International for each single put option in play thus far in the session.
Affiliation: Interactive Brokers
Andrew Wilkinson is the senior market analyst at Interactive Brokers Group, where he provides daily commentary and analysis on U.S. equity options trading throughout the trading day. Andrew provides webinars designed to explain option-related trading scenarios covering futures, fixed income, forex and equities.
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