Put buyers dealt profits in $MGM

MGM Resorts (MGM) fell today and bearish option trades are being dealt profits.

On Jul. 6, Market Rebellion’s Unusual Activity programs flagged the the purchase of 6,100 Weekly $42 puts, expiring this Friday, Jul. 23, for $1.03 to $1.10 with shares at $42.62. Volume was clearly above the previous open interest of 41 contracts, indicating that this was a new position.

Those puts sold for as much as $5.55 today, more than 5 times their purchase prices. The stock fell 14.36% in the same time frame, showing how quickly options can far outperform moves in their underlying shares on a relative basis.

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 ended the session lower by 3.43% to $36.63. The casino operator is next estimated to report earnings on Aug. 4.