Let’s take a look at the MGM Resorts (Ticker: MGM) stock chart:
I am seeing a double top at $45.35 and a doji in Friday’s candle.
I think MGM is ready for a pullback from here to at least $42 — maybe even $40.
Looking at the options, I like the Oct. 15 expiration cycle because the markets are narrower and there is trading volume. This gives us a better entry price.
- I like buying the at-the-money 44-strike puts and, if MGM opens down and trades lower, I will pay up to $1.40 for these.
- As MGM trades down, I will look to sell the 40-strike puts against them in the $.60 area.
- The implied volatility of the 44-strike puts is much lower at 39.46 than the 40-strike puts with an IV of 44.14.
- I am looking to get into that $4 spread for around $.75-$.80.
- My Pfizer (Ticker: PFE) calls are expiring Frida, so I need one last push higher to get out of these. Right now PFE looks like it is coiling, ready to make a move higher.
- In China, there are still uncertainties regarding Evergrande getting a bailout for its debt payment — which it missed on Thursday — but has a thirty day grace period. I still think the Xi administration will not let this giant fail. If iShares FTSE China (Ticker: FXI) trades below $37.86 I will take my loss on these calls.
Thanks for Reading … See You Next Tuesday!
Literally Tuesday! At Mark Sebastian’s live event Big Money Flow at 8:00 PM ET. Be there!