Options Play: MSG and LeBron James

Back before Cablevision spun off Madison Square Garden, we did not have a pure options trade on where LeBron James will end up. But today we do have such a play now that MSG is publicly traded, and investors and sports fans are betting that King James will come to the world's biggest stage in New York City.

Intrade.com, the site that will bet on anything, says the odds of James staying in Cleveland had fallen to nearly 50-50 from Tuesday to Wednesday—a drop of more than 12 percent overnight.

Madison Square Garden's shares closed yesterday up 6.41 percent to $21.57 as speculation was rampant in the July 22.50 calls, which saw 11,595 contracts dwarf the average volume of just 102 per day.

Those options have just seven trading sessions to live, but given that the event the investors are betting on hits ESPN airwaves tonight, that should be more than enough time on this binary, something-or-nothing investment.

The stock's volatility is nearly up 50 percent—running to as high as 72 percent yesterday and up from an average of 48 percent over the last 30 days—and it's pretty clear the only catalyst for this is the 25-year-old basketball phenom.

Normal call activity at all strikes is under 500 contracts and puts trade less than 100 per session, but yesterday OptionMonster'ssystems showed 15,679 calls trading versus 5,161 puts.


Najarian does not hold significant shares in the company mentioned in this story.

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Jon 'DRJ' Najarian is a professional investor, CNBC contributor, and cofounder of OptionMonster.com.