Theater chain operator
Cinemark Holdings (CNK) has dropped 9% over the past year, as consumers have largely spent their money on other leisure activities. One trader sees the potential for shares to rally over the summer.
That’s based on the July 19 $19 calls. With 36 days until expiration, 12,768 contracts traded compared to a prior open interest of 145, for an 88-fold rise in volume on the trade. The buyer of the calls paid $0.40 to make the bullish bet.
Cinemark shares recently traded just over $17, so the stock would need to rise by $2, or about 12%, for the option to move in-the-money.
Shares have been trending lower since hitting a 52-week high of $20.40 in early April. But the summer season tends to be stronger for movie theater revenues amid the blockbuster season.
Cinemark is also fairly inexpensive, trading at 11 times earnings.
Action to take: Shares could be oversold enough here to start moving meaningfully higher in the coming weeks. However, investors may want to book profits at the end of the summer season when ticket sales typically start to see a cyclical downturn.
For traders, the July $19 calls could see mid-to-high double-digit returns from here, as shares could see an oversold rally over the coming weeks.
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 company mentioned in this article.
