10/11/2013

MGM Resorts International                  NYSE: MGM              Recent Hi   20.90
   

      MGM has traded in the $12 mid-range breaking out and running above the 16 range was approached briefly 3 – 4 times in the past 4 years, backing down each time before. Trading at the 20 range it seems a bit high so going long in Nov puts and over weighting at the Mar 16 put strike is a good way to take advantage of a short term retrace possibly into or just after next week’s expiration. It isn't a bad play. The downside target is 15.50 with a 38% retracement coming in around 16.50 and the 50% retracement coming in at the 15.00 level.

      Earnings have been negative over the past several quarters and revenues have remained flat. I don’t think it bodes well going into the holiday season as well as potential global slow down especially in China.

Fiscal Year-end    12/2013

P/E Current -5.53

Current EPS -0.02

Revenue $9.16B

Net Income $-1.77B

2012 Sales Growth 16.7%

IV Nov Monthly Options 43%   March Monthly Options 39%

Average Daily Volume  aprox. 7,500,000 shares per day

50 Day Moving Avg.      18.65

Buy the +1 Nov 19p / Sell -2 the Mar 16p for a credit of .50 credit or better. If concerned about downside protection the Nov 15 puts are offered at .03. even if the stock were to fall below 16 and u had the shares put to you through assignment of the Mar 16 puts, you would still be getting long shares at an attractive discount to where the shares are trading at now.

Open Int. (est.)            strike        Nov.  Monthly (10)    Mar Monthly (162)
 

14                           105                                             500

15                           240                                             500

16                        1,400                                          8,800

17                        1,100                                          3,000

18                        3,550                                          6,000

19                      16,500                                          1,050

20                        9,200                                          1,150

21                        7,200                                          7,750

22                        2,100                                          1,800

23                        2,650                                             455

*Disclaimer: This is not a recommendation. All trading entails risk. Anyone employing any strategies and having limited knowledge of options trading should consult with a FINRA licensed professional.