MGM Traders Put-Heavy as Stock Tests New High

SunTrust Robinson has a bearish view of MGM shares

Josh Selway
Dec 6, 2019 at 2:08 PM
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MGM Resorts International (NYSE:MGM) hit an annual high of $32.24 back on Nov. 27, and was last seen holding just below this milestone after finding support in recent sessions near the 20-day moving average, checking in at $32.12. On the day, MGM stock is up 0.6%, even after SunTrust Robinson began coverage on the casino owner with a "hold" recommendation and $35 price target. While the shares are holding up well on the charts, some options traders have been picking up puts.

mgm stock dec 6

For instance, MGM's Schaeffer's put/call open interest ratio (SOIR) caught our eye, since, at 1.16, it ranks in the 100th annual percentile. This shows near-term put open interest outranks call open interest, and such a set-up is rare.

This heavy put-skew is due to a build-up in the January 2020 series at the 25-, 27-, and 28-strike puts. At least the latter strike has seen buy-to-open activity, showing some traders are positioned to profit, should MGM stock pull back in the coming weeks.

We should also point out that MGM's Schaeffer's Volatility Index (SVI) of 22% ranks in the bottom percentile of its annual range. In other words, volatility expectations look muted right now, hinting at a potential edge for premium buyers at the moment. For anyone that is specifically looking for a pullback, the stock's 14-day Relative Strength Index (RSI) of 69.4 is worth calling out, since this indicator in 2019 has tended to make sharp corrections after reaching overbought conditions.


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