Options Intelligence Report: MGM Resorts International (MGM), iShares Silver Trust ETF (SLV) & CNinsure, Inc. (CISG)
Posted on 7/27/2010 in Unusual Activity by Andrew Wilkinson
Bulls Eye Options On MGM Resorts International Ahead Of Q2 Earnings
MGM – MGM Resorts International
The operator of casino resorts attracted bullish options players this afternoon with the price of the underlying stock rallying as much as 3.65% to an intraday high of $11.36. It looks like investors expecting shares to continue higher ahead of August expiration purchased call options. The most optimistic of individuals picked up approximately 5,200 calls at the August $13 strike for an average premium of $0.21 each. Call buyers at this strike make money if MGM’s shares surge 16.3% to trade above the average breakeven price on the upside at $13.21 by expiration day next month. Other bullish traders who are perhaps hoping shares can retain the present rally, but not looking for shares to move much higher ahead of expiration in August, sold 3,000 puts at the August $10 strike for an average premium of $0.37 each. If investors are selling these puts outright, they walk away with the full premium received on the transaction as long as MGM’s shares exceed $10.00 through expiration day. Investors populating MGM Resorts International today exchanged more than 2.2 call options for each single put option in play on the stock as of 3:45 pm ET. MGM is scheduled to report its second-quarter results ahead of the opening bell of August 3, 2010.
SLV – iShares Silver Trust ETF
Shares of the iShares Silver Trust fell more than 2.90% to $17.26 in late afternoon trading inspiring some traders to load up on put options. Fresh put activity was most heavily concentrated in the September contract where current put volume at in- and out-of-the-money strikes exceeds previously existing open interest. Investors bracing for further bearish movement in the price of the SLV’s shares purchased 1,900 in-the-money puts at the September $18 strike for an average premium of $1.17 apiece. In-the-money put buyers are prepared to profit should shares of the fund decline another 2.5% to slip beneath the average breakeven point on the downside at $16.83 by September expiration. Put volume was heaviest at the September $16 strike where more than 16,700 contracts changed hands by 3:25 pm ET. It looks like investors purchased at least 14,400 of those lots for an average premium of $0.29 each. Shares of the fund must fall 9.00% from the current price before September $16 strike put buyers breakeven at a share price of $15.71. Finally, pessimists purchased roughly 2,000 put options at the lower September $15 strike for an average premium of $0.12 a-pop. Profits are available to investors long the lower-strike contracts if the SLV’s shares plunge 13.8% to trade below the average breakeven price of $14.88 by expiration day. Options implied volatility on the SLV is up 5.4% to 27.03% as of 3:30 pm ET.
CISG – CNinsure, Inc.
Bearish investors dominated options trading activity on the insurance intermediary engaged in marketing and selling insurance products in China. CNinsure’s shares fell as much as 5.1% this afternoon, touching down at an intraday low of $23.04, and are currently down 3.90% on the day to stand at $23.25 as of 3:10 pm ET. Pessimistic players expecting CISG’s shares to continue to decline in the next couple of months purchased put options in the September and October contracts. Traders picked up approximately 4,500 puts at the September $20 strike for an average premium of $0.75 apiece. Investors long the puts are positioned to profit should CNinsure’s shares plunge 17.2% from the current price of $23.25 to breach the average breakeven price to the downside at $19.25 by September expiration. Bearish sentiment spread to the October $20 strike where some 2,200 put options were purchased at an average premium of $1.25 a-pop. Put buyers at this strike make money as long as the price of the underlying stock plummets 19.35% from the current price to trade beneath the average breakeven point on the puts at $18.75 by October expiration. The demand for put options on CNinsure today helped lift the overall reading of options implied volatility on the stock 25.7% to 49.70% by 3:20 pm ET.
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