$MLCO call prices spike 7-fold

Bullish option traders are posting exponential gains in Melco Resorts & Entertainment (MLCO) today.

On Dec. 4, Market Rebellion’s Unusual Activity Service identified the purchase of 3,500 December $22 calls for $0.25 to $0.35 with shares at $21.33. This was clearly fresh buying, as volume was well above the strike’s previous open interest of 1,611 contracts.

Those calls have traded for $1.75 so far today, 7 times their purchase price. The stock rose 11.39% in the same time frame, underscoring how quickly options can far outperform their underlying shares.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

MLCO is up 2.43% to $23.78 this morning. The company has rallied sharply along with other casino operators since China announced plans to make gambling capital Macau a major financial center.