Bulls Roll Dice On Melco Crown Entertainment Ltd (ADR) (MPEL)

Melco Crown Entertainment Ltd (ADR) is being swarmed by post-earnings option bulls

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Published on Nov 6, 2014 at 1:46 PM
Updated on Jun 24, 2020 at 10:16 AM

Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL) is up 1.2% this afternoon at $24.68, despite earlier posting disappointing third-quarter results. Against this backdrop, the casino operator's options pits are humming, with calls trading at five times the expected intraday rate.

Most active by a mile is MPEL's November 26 call, where 11,238 contracts are on the tape. For comparison, the stock's second most active strike has seen fewer than 1,500 contracts exchanged thus far.

Digging deeper, the majority of the front-month calls have traded at the ask price, and volume dwarfs open interest, making it safe to assume buy-to-open activity is transpiring. This theory is echoed by data from Trade-Alert and the International Securities Exchange (ISE). In short, these call buyers expect MPEL to rally past $26 by the close on Friday, Nov. 21, when the options expire.

Moving to the charts, it's been a rather miserable year for Melco Crown Entertainment Ltd (ADR) (NASDAQ:MPEL). The stock has tumbled 37% in 2014, and has underperformed the broader S&P 500 Index (SPX) by almost 15 percentage points during the last 60 sessions. As such, delta on the November 26 call is just 0.30, signifying a 30% chance the option will be in the money at expiration.


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