Market Insights

Traders are keeping their chips on the table as a key gambling stock rips higher.

Scientific Games (SGMS), a provider of everything from slot machines to state lotteries, has more than doubled in the last year as management ironed out its operations and rebuilt its balance sheet. This month it got an added boost from the U.S. Supreme Court opening the door to increased sports betting.

Here’s what happened in the options market yesterday:

• Roughly 5,000 July 60 calls were sold for about $4.45. Volume was below open interest at the strike, which suggests an existing long position was liquidated.
• At the same time those sales occurred, blocks of the October 70 calls were purchased. But this time, more than 7,000 contracts changed hands for an average premium of $4.70.
• That nets out to a cost of $1 million.

Calls fix the price where price where a stock can be purchased, so they can profit to the upside. Wednesday’s trader apparently made money on the July 60 calls, so he or she sold them and rolled into the October 70s. They also increased the size and put more capital on the line for an additional three months of long exposure. In Vegas they call that “upping the ante.” See our Knowledge Center for more.

SGMS ended the session up 0.25 percent to $59.90. Overall option volume was almost triple the daily average in the last month, with calls outpacing puts by a bullish 8-to-1 ratio.

Disclaimer: This post is not a trade recommendation. Options trading may not be suitable for all investors.

Scientific Games (SGMS)