Unusual Options Activity: AMC Entertainment Holdings Inc (AMC)

Shares of theater chain AMC Entertainment Holdings (AMC) have been on a volatile ride in the past year, but the stock is down about 30 percent. One trader sees the possibility for a further drop in the months ahead.

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  • That’s based on the October $25 put option. With 73 days left until expiration, 4,829 contracts traded compared to a prior open interest of 147, for a 33-fold rise in volume on the trade. The buyer of the puts paid $7.30 to get in.

    The stock recently went for about $22, meaning these put options are already about $3.00 in-the-money.

    The theater chain is coming off a strong operational year following the pandemic, with a 430 percent increase in revenue. However, the company hasn’t gotten back to profitability yet, and the economy is starting to slow.

    Action to take: Shares are volatile given the company’s ongoing interest by retail investors. Those interested in shares can likely buy on a sizeable pullback in the stock. With a 52-week low just under $10, interested investors might want to wait for a drop to $15 or under.

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  • For traders, the October puts are ideally positioned for market conditions over the next few months. The puts are already at-the-money following Monday’s rally. At these prices, they can deliver mid-double-digit gains without the total risk of a loss if shares simply trade around their current level.

     

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