Today’s trade idea for option traders: MGM Resorts International (trade closed)

(Last Updated On: 12. January 2021)

trade idea for option traders

MGM Resorts was another victim of the Covid19 pandemic and the lockdown (like the most casino stocks). And with its most important areas like Las Vegas, Macao, etc., casinos seem now to have a long way to to reach the profit levels before the pandemic. But since the positive news from Pfizer and Germany’s Biontech, casino stocks are beginning to recover.  Also, The American Gaming Association points out in its Commercial Gaming Revenue Tracker for Q3 2020, that the gambling industry is recovering better than assumed. At least, the sports betting and iGaming are chipping in to mitigate the losses from table gambling. Maybe this recovery phase ist just a brief one as new lockdowns are possible again. But for option traders, there opens an short term opportunity for an option trade on MGM. 

The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.

Type of a trade: Cash secured put
Alternatively: Bull put spread
Expiration: 24th December 2020 (37 days)
Strike: $26.5
Premium for 1 option: between $180 and $190 on the day this article was published
Margin: apprx. $600 on the day this article was published

Pros for this trade:
– An increasingly rising momentum and a long signal (I’m using the ADX-Indicator), giving a higher probability that the price won’t be pushed under the strike in the next 37 days
– Higher probability of increasing stock prices after Pfizer’s and Biontech’s news on development of Corona vaccine
– Relatively narrow bid-ask spread

Cons for this trade:
– Low IV Rank of 8% and low IV Percentile of about 27% (Source: Trader Work Station)
– Positive news about Corona vaccine could turn out as a flash in the pan which could cause a drop below the strike of $26.5
– Because of Corona situation and the lockdowns in different countries, a puny dividend of around 0.04% because of lack of revenues
– New lockdowns are possible in the near future

Result of this trade:
You could close the position on 9th November for about $15 – $20
Realized profit for 1 option: $160 – 170$
Days in the trade: 22 (of maximum 37 days)


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