Unusual Options Activity: Caesars Entertainment (CZR)

Shares of casino giant Caesars Entertainment (CZR) have been steadily declining since early June. However, one trader see the possibility for a strong rebound.

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  • That’s based on the December $125 calls. With 115 days until expiration, over 20,015 contracts traded compared to an open interest of 186, for a 108-fold jump in volume. The buyer of the calls paid about $1.27 to make the trade.

    Even with the recent decline, the casino company has seen shares rise 85 percent over the past year as the economy has reopened. However, shares still remain unprofitable, even as the most recent quarter shows a 1,870 percent jump in growth.

    Action to take: Trading at about 10 times estimated forward earnings, shares look attractive, provided the economy avoids further lockdowns. For the moment, the company doesn’t pay a dividend, so investors won’t get paid to wait on this trade.

    The December calls suggest a big move higher, given a recent share price of about $85. Traders may consider the December calls. Their low price could lead to a triple-digit return on a rally back in shares, but the move to $125 from $85 is a full 47 percent jump, so look to take quick profits and move on to the next trade.

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    Disclosure: The author of this article has no position in the company mentioned here, but may make a trade after the next 72 hours. The author receives no compensation from any of the companies mentioned in this article.