Bulls are dealt profits with $MGM

MGM Resorts (MGM) popped today and bullish option trades are being dealt profits.

Just yesterday on Aug. 27, Market Rebellion’s Unusual Activity Service flagged the purchase of 3,000 Weekly $23 calls expiring on Sep. 4 for $0.53 to $0.75 with shares at $22.69. This was clearly fresh buying, as open interest in the strike was just 808 contracts before the trades occurred.

Those calls sold for as much as $1.84 today, at least 2 times their purchase prices. The stock rose 6.13% in the same time period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

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.

MGM ended the session higher by 4.6% to $23.86. The casino operator announced today that it would lay off about 18,000 of its furloughed employees.