MGM holds a 50% stake in a Macau property, which many analysts speculate is their most valuable holding. The company is also actively working on projects in Dubai, United Arab Emirates, some of which will be entirely non-gaming. Finally, as US Regulators begin to possibly ease restrictions in online gambling, MGM is seen as an immediate beneficiary to this type of deregulation.
MGM shares have performed exceptionally well in 2013, up 44 percent YTD. Beginning today’s session up modestly and trading $17.85, the stock is trading above the 50 ($16.15), 100 ($15.27), and 200 ($13.66) day moving averages.
Based on the unusual option activity we saw yesterday with Paper selling 5,000 MGM Mar 16 Puts for $1.06, we feel this sets up well for a covered call strategy.
Our Trade:
Sell 1 MGM Mar 16 Call at $2.95 for every 100 shares of MGM bought at $17.85.
Traders employing this strategy will achieve maximum profitability so long as the stock stays above $16, however, the trade will remain profitable anywhere above $14.90.
