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Option Brief: Buy-to-open put activity has reached peak levels in MGM Resorts International's (NYSE:MGM) options pits of late, but today's speculators are showing a change of heart. At last check, calls were trading at two times the average intraday pace, with the majority of speculators either betting on a big pop in the near term, or perhaps hedging against one.
Of the 9,764 calls that have crossed the tape thus far, 61% have done so at MGM's May 32 strike. The bulk of these contracts went off at the ask price, implied volatility is higher, and only 109 contracts make up open interest here. In other words, it seems likely that a new batch of bullish bets is being initiated. Based on the volume-weighted average price (VWAP) of $0.12, breakeven at the close on Friday, May 16 -- when these options expire -- is $32.12, or the strike plus the VWAP.
Technically speaking, MGM has been a long-term outperformer, with the shares roughly doubling in value on a year-over-year basis to linger near $26.13. More recently, the equity has been testing support at its 40- and 60-day moving averages following a brief pullback from its multi-year high of $28.75, tagged earlier this month.
On the fundamental front, the lifetime of the aforementioned calls encompasses the tentative release of MGM Resorts International's (NYSE:MGM) first-quarter earnings results. With 7.2% of the stock's float sold short, a portion of today's call buying at the deep out-of-the-money strike could be at the hands of short sellers hedging against any earnings-induced upside.