Options Bulls Blitz MGM Resorts Stock on Activist Chatter

Calls are trading at four times the intraday average

Aug 29, 2018 at 3:08 PM
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Options volume is accelerated on MGM Resorts International (NYSE:MGM) this afternoon, even as rumors fly that activist investors are restless with the casino stock's performance. With MGM shares brushing off the speculation to trade up 1.5% at $29.59, nearly 51,000 calls are on the tape -- four times what's typically seen at this point in the day.

Among the most active MGM options today are the weekly 8/31 29-strike and 30-strike calls, where it looks like new positions are being initiated. If this is the case, speculative players are expecting the shares to extend today's upside through the close this Friday, Aug. 31.

Call buyers have already been targeting MGM stock at an accelerated clip relative to put buyers in recent weeks. At the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), the security's 10-day call/put volume ratio of 2.30 ranks in the 77th annual percentile.

But while short-term options are pricing in relatively low volatility expectations at the moment -- per MGM Resorts' Schaeffer's Volatility Index (SVI) of 25%, which registers in the 9th annual percentile -- puts are currently cheaper than their call counterparts, historically speaking. This is based on the stock's 30-day implied volatility skew of 1.8%, which ranks in the 2nd percentile of its 12-month range.

Looking at the charts, MGM has been stuck beneath a trendline connecting lower highs since a mid-May rally attempt was quickly stalled by the stock's 200-day moving average and April 26 bear gap high near $34. Just above here is the security's 80-day moving average and negative 10% year-to-date level, located near $30.

mgm stock daily chart aug 29


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