Early bets pay off for bulls at MGM

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Upside option trades in MGM Reports opened early this year have proven worth the wait.

Back on Feb. 16, Investitute’s proprietary programs found that 4,500 June $28 calls were purchased for $1.66 as part of a bullish three-way strategy. Shares were trading for $27.61 at that time.

Today those calls sold for $4.55, a profit of about 175 percent, before expiring this afternoon. The stock gained 18.3 percent in the same period, showing how options can outperform their underlying shares.

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.

MGM was up 0.09 percent to $32.61 today. The company has rallied with other casino operators such as Las Vegas Sands since the beginning of the month on strong numbers from Macau.

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Mike Yamamoto | Investitute

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