Calls collect huge winnings in MGM

MGM Resorts paid off in spades for bullish option positions today.

On Oct. 12, Investitute’s market scanners identified the purchase of 9,750 November $31 calls for $0.86 as part of a bullish spread with shares at $30.15. Volume was well above the strike’s open interest of 2,100 contracts, showing that this was a new position.

Those calls traded up to $2.49 this afternoon, 3 times their original purchase price. The stock rose 10.3 percent in the same time, illustrating the kind of leverage that can be achieved through 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 jumped 5.09 percent to $33.06 today. The casino operator beat earnings and revenue estimates before the market opened.