Stocks quoted in this article:
Of the 17,000 MGM Resorts International (NYSE:MGM) calls that changed hands yesterday, roughly half occurred at the September 15 strike. A majority of the contracts traded at the ask price, and opened interested spiked by 7,500-plus positions overnight -- together suggesting the initiation of fresh bullish bets. Information from the International Securities Exchange (ISE) confirms that hypothesis, as well.
The calls traded at a volume-weighted average price (VWAP) of $0.57. Therefore, in order for the traders to profit from the play, they need MGM shares -- which gained $0.78 to $14.48 in today's session, following an upgrade to "buy" from "neutral" at Nomura -- to trek north to $15.57 (strike price plus VWAP) by options expiration. If the move doesn't materialize, however, they will forfeit no more than the premium paid.
Like sector peer Las Vegas Sands Corp. (NYSE:LVS), traders at the ISE, Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) have taken a shine to MGM Resorts International over the past several weeks. The stock's 50-day ISE/CBOE/PHLX call/put volume ratio stands at a lofty 4.35, with calls bought to open outpacing puts by a margin in excess of 4-to-1. The ratio ranks higher than 95% of comparable readings taken over the past year, which points to a stronger-than-usual appetite for calls over puts.
As a result, MGM features a Schaeffer's put/call open interest ratio (SOIR) of 0.92. In other words, for options expiring over the next three months, call open interest is higher than put open interest. Relative to the past 52 weeks, the current SOIR has been lower only 15% of the time, meaning short-term bullishness is running high.
The optimism isn't shocking. After all, MGM Resorts International (NYSE:MGM) is a technical stalwart, having gained nearly 25% year-to-date, which is nearly 10 percentage points better than the S&P 500 Index's (SPX) 2013 performance.