July 11th Options Now Available For MGM Resorts International (MGM)

A covered call strategy on MGM stock, involving purchasing shares at $31.71 and selling a $32.00 call expiring July 11th for a $0.20 premium, offers a potential 1.55% return if the stock is called away. If the contract expires worthless, which current data suggests has a 47% probability, the investor retains the premium, boosting the yield by 0.63%, or 5.35% annualized; the implied volatility in the call contract is 44%, while the trailing twelve month volatility is 43%.

Analysis

The article details a specific covered call options strategy on MGM Resorts International (MGM) stock, which is currently trading at $31.71 per share. The proposed strategy involves purchasing MGM shares and simultaneously selling a call option with a $32.00 strike price, expiring on July 11th, for a premium of $0.20 per share. If MGM's stock price is at or above $32.00 at expiration and the shares are called away, the investor realizes a total return of 1.55% (excluding dividends and before broker commissions). This $32.00 strike is approximately 1% out-of-the-money relative to the current stock price. There is a 47% probability, based on current analytical data, that this call option will expire worthless. In such a scenario, the investor would retain both their shares and the collected premium, achieving a 0.63% return enhancement from the premium, which annualizes to a 5.35% "YieldBoost". The implied volatility of the discussed call option is 44%, closely aligning with MGM's actual trailing twelve-month historical volatility of 43%, calculated over the last 250 trading days.

Key Decisions for Investors

• Investors considering this covered call strategy on MGM should weigh the potential 1.55% return if shares are called away at $32.00 by July 11th against the capped upside, as significant gains beyond $32.00 would be foregone.
• This strategy may be suitable for investors with a neutral to mildly bullish short-term outlook on MGM who are seeking to generate incremental income (0.63% premium, or 5.35% annualized YieldBoost if the option expires worthless) and are comfortable selling their shares at the $32.00 strike price.
• Given the close proximity of the option's implied volatility (44%) to the stock's historical volatility (43%), the option appears reasonably priced; however, a thorough review of MGM's business fundamentals and recent trading history, as suggested by the article, is crucial before committing capital.