$PENN wager pays off for bulls

Penn National Gaming (PENN) dealt bullish option traders a winning hand today.

On Aug. 11, Market Rebellion’s Unusual Activity scanners identified the purchase of 2,000 Weekly $50 calls expiring tomorrow, Aug. 14, for $0.56 to $1.66 with shares at $49.13. These were clearly new positions, as open interest in the strike was just 1,340 contracts before the activity appeared.

Those calls traded up to $4.80 today, well over double their purchase prices. The stock rose 11.19% in the same time frame, illustrating the kind of leverage that can be achieved through 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.

PENN made a new high of $54.72 today and closed at $53.35, up 7.21% on the day. The casino operator was initiated with a Buy at Goldman Sachs this morning, with a $60 price target.