$MGM traders cash in winnings

Option traders collected substantial returns on bullish positions in MGM Resorts today.

On March 5, Investitute’s market scanners identified the purchase of 5,000 April $34 calls for $1.28 as part of a bullish spread with shares at $33.70. Volume was well above the strike’s open interest of 1,304 contracts, showing that this was a new position.

Those calls sold for $3.10 today, about 2.5 times their purchase price. The stock rose 8.9% in the same, illustrating the kind of leverage that can be achieved with options.

Long calls lock in the price where a 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 off 1.66% today to close at $36.12. The casino operator’s next quarterly results are estimated to be released on April 26.