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MGM: Will its Earnings Make a ‘Grand’ Showing?

Bet on this big-name casino with March calls


There is a lot to like about Las Vegas. There are a plethora of activities for almost every kind of person. If you are there to eat, you’ll find some of the best restaurants in the world there. But if you want to gamble in this adult playground, you can win or lose in almost every conceivable way possible.

The best way to make money isn’t necessarily at the slot machines or the Roulette tables. Instead, you would likely do better not betting in one of the legendary casinos, but betting on one. And while most of the major venues also offer Broadway-quality shows, it’s today’s trade idea that might just be a show-stopper.

They say that the trend is your friend. If that is indeed true, MGM Resorts International (NYSE:MGM) should be best friends with bullish traders. The stock has been on a bullish run for almost two months. What is nice about this stock is that there are no signs that it may be slowing down.

Even a down day like there was in the market on Friday couldn’t keep MGM down. And here, with MGM trading at $14.63, you could buy the MGM March 14 Calls for $1.23 or less.

The long call is a basic strategy in options trading. The strategy can profit if the stock rises and the call premium increases to an amount more than was paid. Maximum profit is unlimited because MGM can continue to rise and the maximum loss is $1.23 if MGM finishes below $14 at March expiration. Breakeven is $15.23 at expiration.

A nice target that the stock might move toward is $16 (previous high) and then $17 (two-year high). The only thing that might stop the MGM show is that the company is expected to announce earnings on Feb. 22. That may be a good time to leave and catch another show.

Of course, we’ve just seen good earnings from Wynn (NASDAQ:WYNN), which beat estimates, and Las Vegas Sands (NYSE:LVS), whose numbers were in-line with expectations but revenues came in higher than expected. Like these other companies, which reported strong business in Macau, MGM could benefit from being a competitor in that region as well.

Article printed from InvestorPlace Media,

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