$ERI bulls bet on gains

Eldorado Resorts (ERI) has surged this week, continuing its rise off its March lows, returning huge profits on upside option positions.

On May 19, Market Rebellion’s Unusual Option Activity Service detected the purchase of 3,800 Weekly $30 calls expiring on May 29 for $1.65 to $2.10 with shares at $28.92. This was clearly fresh buying, as open interest in the strike was just 2,097 contracts before that session began.

Those calls traded for $4.90 today, more than 2 times their purchase prices. The stock rose 18.98% in the same time frame, a huge move but still nowhere near that of its options.

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.

ERI was higher by 2.63% today closing at $33.54. The casino operator announced yesterday morning that it would resume operations at three of its Mississippi casinos.