Call prices triple overnight in $MGM

MGM Resorts rallied today on a strong earnings report, delivering large returns on bullish option positions opened only one session earlier.

Just yesterday, Investitute’s market scanners found that 4,000 Weekly $24 calls expiring this Friday were purchased for $0.98 to $1.02 with shares at $24.19. This was clearly fresh buying, as open interest in the strike was a mere 155 contracts before the trades occurred.

Those calls sold for $2.85, about 3 times their purchase prices. The stock rose 11.04% at the same time, showing how quickly options can far outpace gains in 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.

MGM jumped 5.92% to $26.68 today. The casino operator beat quarterly estimates on the top and bottom lines after the market closed yesterday.