Disclaimer: Please use the information here for entertainment purposes only as we are not financial advisors. Trading involves financial risks and we are not making any recommendations or responsible for any loss.
What happened to US stocks when the coronavirus had spread out of China and into the United States? We will discuss a few stocks that were affected by the coronavirus along with some trading strategies you can employ to possibly profit from this event.
It’s Chinese New Year and millions of Chinese usually travel to play games at the casinos in Macao. However, we also have the coronavirus making headlines that it can transmit through the air, would you risk going to these crowded casinos? Or would you perhaps enjoy playing the casino games online instead?
This thesis of the coronavirus is what had driven the casino and hotel stocks down in the US. Many of these stocks have priced in the 10 day holiday that millions of Chinese will be taking. When the CDC (Center for Disease Control) had announced that the coronavirus was airborne, each of the stocks we have listed here began dropping.
The 3 US casino stocks that were impacted by the coronavirus were: MGM Resorts International (MGM), LVS and WYNN.
As we look at MGM’s charts in 3 different timeframes, it is apparent that the stock was embarking an uptrend but the bad news had triggered a sell-off.
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How to position for MGM and coronavirus?
We will need to formulate an outlook for the coronavirus to answer this question. A short term bearish and longer-term bullish or neutral view paints a picture that the virus will cause havoc in the short term and our scientists will come up with a vaccine or be able to contain.FIND THE BEST AIRPORT PARKING OPTIONS. Compare parking lots, rates, info and reviews. Only At AirportParking.com Shop Now!
We have observed a support range around the $30/$29 areas.
An option strategy may be to purchase the $30 put options or create a spread with at least a 1 to 1 risk-reward ratio. Your option position will appreciate in value as the stock tumbles in the near term.
You may also consider purchasing a call option to capture gains when the situation is under control.
If you belong to the pandemic armageddon camp, in which this virus will hinder travel around the world for many years, then a put option below the support level may be more cost-effective. This approach is suitable for the long term bearish outlook.
How would you play MGM with the coronavirus news? Please share some comments with us below!
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