Unusual Options Activity: IMAX Corporation (IMAX)

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  • Theater chains rallied on a potential Covid vaccine, with IMAX Corporation (IMAX) up a staggering 25 percent. But at least one trader sees a further rally ahead.

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  • The December 18th 2020 $15 call options saw over 25,260 contracts trade on Monday. That’s a 46-fold surge from the open interest of 544 contracts. Expiring in 38 days, the contracts cost the trader about $0.80 each.

    Monday’s surge in shares moved the price to just under $15, making this option the at-the-money trade. Even with Monday’s surge, shares are still down about 45 percent over the past year. Many movie theater chains remain either closed entirely, or open at limited capacity. The delay of film releases—or their bypass of theaters straight to streaming— will also weigh on openings as well.

    Action to take: While the announcement of a vaccine is great news, chances are it won’t mean a fully open economy within a month. This short-dated option will likely trade higher, and can possibly even double further from here. But it will lose its time premium quickly.

    But traders looking to potentially avoid a complete wipeout may want to look farther out. The June 2021 $15 calls have a bid/ask spread of around $2.40, and can likely deliver mid-to-high double-digit results without having to bleed out time premium over the next month.

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