MPEL ? Melco Crown Entertainment Ltd.
A call spread initiated on casino operator, Melco Crown Entertainment, this morning suggests one options strategist is positioning for shares in the name to rally into 2013. Melco and other casino stocks with operations in Macau are extending gains today one week after the gambling hub reported a 5.5% increase in August revenues, the second-highest monthly reading ever for Macau?s casino industry. Shares in Melco, which have posted double-digit percentage gains since last week, gained 1.9% this morning to stand at $12.83 as of 11:45 a.m. ET.
It looks like one trader purchased a 1,000-lot Jan. 2013 $11/$15 call spread at a net premium of $2.00 per contract. The bullish strategy makes money if shares in the casino operator rally above the effective breakeven price of $13.00, and generates maximum potential profits of $2.00 per contract in the event of a 17% move to the upside to top $15.00 by expiration next year. Shares in the name last traded above $15.00 in May.
AIG ? American International Group, Inc.
Weekly call options looking for a near-term pop in shares of AIG were heavily traded on Tuesday after the U.S. government reduced its stake in the company to 16% from 53%. The Sep. 14 ?12 $32.5 strike call saw the most action yesterday, with open interest in the weekly contracts rising by 22,864 positions overnight. Shares in AIG opened 2% lower at $32.59 on Tuesday morning, yet calls changing hands at the $32.5 strike were mostly purchased for an average premium of $0.68 apiece in the first half of the session.
The bullish activity in AIG options amid the dip in the price of the underlying yesterday signaled some traders were preparing for the stock to reverse course later in the week. AIG shares managed to reverse losses during the previous trading session, ending Tuesday in positive territory, and continued to brighten today.
The stock jumped 3% to hit an intraday high of $34.44 within 15 minutes of the opening bell Wednesday, sending premium on the $32.5 strike calls to more than $1.40 each, twice the average premium paid by traders on Tuesday. Current volume of 2,622 weekly calls in play at the $32.5 strike as of 12:40 p.m. ET indicates traders are holding onto their positions for now. Call buyers profit at expiration as long as shares in the insurer settle above the average breakeven price of $33.18.
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