$MGM bets pay off big for bulls

Option traders have more than doubled their money on positions opened in MGM Resorts just one week ago.

On Jan. 9, Investitute’s market scanners identified the purchase of 3,000 February $34 calls in one print for $1.09 with shares at $33.73 after a positive note from JP Morgan at that time. This was clearly a new position, as open interest in the strike was only 758 contracts before the trade occurred.

Those calls sold for $2.88 today, more than 2.5 times their purchase price. The stock rose 7.86 percent in the same time frame, 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 was up 2.85 percent to $36.03 today. Morgan Stanley noted that the casino has lagged its peers but said it expects the stock to perform better this year.