Tony Zhang Sees Unusual Options Activity In Melco

On CNBC's "Options Action," Tony Zhang said he saw a sizable bet on a rebound for Macau gaming stocks through Melco Resorts & Entertainment Ltd MLCO on Wednesday. It was a fairly average day as about 6,000 contracts were traded, but calls outpaced puts by almost 4 to 1.

A single trade accounted for more than 40% of the total options volume in Melco on Wednesday. A trader bought 2,382 contracts of the January $12 calls for 85 cents. These calls are about 21% out of the money, so that seems pretty far away, said Zhang. Melco is a pretty volatile stock and the options market is implying there is a 38% chance it could be above $12 by the January expiration, he added.