On CNBC’s “Options Action,” Tony Zhang said there has been a lot of optimism and strength around casinos and sport betting companies, but it is time to start fading some of that strength. He suggested a bearish options strategy in MGM Resorts International (NYSE:MGM).
The stock has been in an uptrend for the last six months, but it recently broke below the trend line. It came back to retest the trendline on Friday so now it is trading at its resistance.
Zhang sees that as an opportunity to make a bearish bet and he wants to buy the July $38/$33 put spread for around $1.50. The trade breaks even at $36.50, or 6.67% below the closing price on Friday.
The trade would reach its maximal profit of $3.50 if the stock drops to $33 or lower at July expiration.
Traders who want to place this trade on Monday might want to move strikes up one dollar and use the July $39/$34 put spread, said Zhang.
