Meme Stock, Call Traders Enjoy Post-Earnings Pop

Year-over-year, AMC is already up roughly 1,500%

Deputy Editor
Aug 10, 2021 at 9:47 AM
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The shares of AMC Entertainment Holdings Inc (NYSE:AMC) are once more the talk of Wall Street, last seen up 7.6% to trade at $36.37, after the movie theater name reported smaller-than-expected second-quarter losses of 71 cents per share. AMC Entertainment's revenue also beat Wall Street's forecasts, with the Reddit favorite benefitting from easing Covid-19 restrictions and the release of several hit movies which kept theaters full.

Prior to today's breakout, AMC closed last night at $33.80, a far cry from its June 2 record high of $72.62. The shares' 100-day moving average stepped up as support though, helping AMC maintain a more than 1,500% year-over-year lead thanks to plenty of attention from retail traders over the last year.

As with most meme stocks, there's ample short squeeze potential. Short interest fell by 6.3% in the two most recent reporting periods, yet the 79.75 million shares sold short accounts for nearly 16% of AMC's total available float.

An unwinding of pessimism in the options pits would send the security higher. The stock's 50-day put/call volume ratio of 0.71 at the International Securities Exchange (ISE), Cboe Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks in the elevated 97th percentile of its annual range. While this indicates calls outnumber puts on an absolute basis, the high percentile suggests a healthier-than-usual appetite for puts of late. 

Today, though, is a different story. In just the first half hour of trading, 84,000 calls have changed hands, volume that's double the average intraday amount. Leading the charge is the weekly 8/13 August 40-strike call, while new positions are being opened at the 37 strike in the same series.

Now seems like a great opportunity to weigh in on AMC Entertainment stock's next move with options. The security's Schaeffer's Volatility Index (SVI) of 183% sits in the relatively low 20th percentile of its annual range, indicating options players are now pricing in low volatility expectations. What's more, the equity's Schaeffer's Volatility Scorecard (SVS) sits at 89 out of 100, meaning AMC has managed to exceed volatility expectations during the past year -- a boon for option buyers.


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