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How one trader is trying to hit the jackpot in a casino stock

It's been a great year for shares of MGM Resorts, which have soared 29 percent in 2016. But one trader thinks the casino stock is set to rise even higher in the months ahead.

Andrew Keene, CEO of AlphaShark.com, says MGM is in the midst of a "bull channel" that began in late July, and has taken the stock from $21 to $30. At this point, he says $30 is serving as a level of resistance, but he sees it breaking through soon.


"I think that is going to become new support for MGM," Keene said Thursday on CNBC's "Trading Nation." "I think MGM takes out $30 and moves up to $35 by next June."

Giving Keene more reason for his bullish outlook is an institutional buyer he saw come into the options market recently, purchasing more than 5,000 June 30-strike calls on the stock.

In order to play for a move up to $35, Keene turns to the options market. Specifically, he purchases the June 30-strike calls and sells the June 35-strike calls for a total of $1.50 per share, or $150 per options spread. In order for Keene to make money on his trade, MGM would have to close above the break-even level of $31.50 by June expiration. If MGM does indeed close at or above $35 on June 16, he could more than triple his money on the trade.

In order to play for a move up to $35, Keene purchases the June 30-strike calls and sells the June 35-strike calls for a total of $1.50 per share, or $150 per options spread. For Keene to make money on his trade, MGM would have to close above the break-even level of $31.50 by June expiration. If MGM does indeed close at or above $35 on June 16, he could more than triple his money on the trade.

Since he's risking much less than he could potentially make, Keene calls the trade "a great reward-to-risk setup."

Trader takeaway: Keene is bullish on MGM Resorts, and is buying the MGM June 30/35-strike call spread for $1.50 per share.


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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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