Put prices double in $MGM

MGM Resorts (MGM) is trading lower amid a continued rise in coronavirus cases in some states, delivering fast returns on bearish option positions opened earlier this week.

On Jul. 6, Market Rebellion’s Unusual Activity Service flagged the purchase of 5,000 July $17 puts for $0.79 to $0.82 with shares at $17.40. This was clearly fresh buying, as open interest in the strike was a mere 1,644 contracts before the trades occurred.

Those puts have sold for as much as $1.77 so far today, more than 2 times their purchase prices. The stock fell 10.57% in the same time period, illustrating how options can far outperform moves in their underlying shares on a relative basis.

It is the second winning downside trade in the name posted by Market Rebellion in as many weeks.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

MGM has dropped today, last trading lower on the session by 3.22% to $15.62 while some states report higher cases of the coronavirus.