Big bet pays off in Scientific Games

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A large investor is doubling down on a winning hand in casino-equipment company Scientific Games.

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Way back on Feb. 24, Investitute’s tracking systems detected the purchase of 5,000 January $22 calls in one print for $3.80 with shares at $20.10. This was clearly a new position, as open interest in the strike was a mere 15 contracts before the trade occurred.

Today those calls were sold for $11.25, tripling in value. But instead of simply pocketing those profits and walking away, the trader bought 11,500 January $35 calls for $3.40 in a bullish roll. The stock surged 62 percent since the original February options were purchased, a huge gain but still far less than that of the options on a a relative basis. Investitute co-founder Pete Najarian cited today’s bullish call roll on CNBC’s “Halftime Report” this afternoon.

Long calls lock in the price where the stock can be purchased, gaining with a rally and providing leverage to the underlying shares. The contracts can quickly lose value if the stock stalls or pulls back but also carry less risk than owning the shares themselves.

SGMS spiked higher by 27.19 percent today to close at $34.15. The company, which makes technology products used in gambling, rallied after second-quarter revenues surpassed expectations this morning.

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Mike Yamamoto

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