Options Traders Blitz Latest Amazon Victims

IMAX is lagging its sector peers on the Amazon news

Aug 16, 2018 at 2:30 PM
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Reports that Amazon (AMZN) is in talks to buy Landmark Theatres -- a movie theater company co-owned by Mark Cuban -- put pressure on several entertainment stocks in early trading today. And while AMC Entertainment Holdings Inc (NYSE:AMC) and Cinemark Holdings, Inc. (NYSE:CNK) have brushed off the speculation to trade higher, Imax Corp (NYSE:IMAX) is feeling the heat.

AMC Entertainment Stock Hits 52-Week Peak

AMC Entertainment stock was down 2.8% earlier, but has since swung 3.7% higher at $18.35 -- fresh off an annual high of $18.45. The shares have been trading in a channel of higher highs and lows since mid-November, and tackled long-term resistance at their 320-day moving average back earlier this month.

amc stock daily chart aug 16

Against this backdrop, AMC call volume is running at roughly two times what's typically seen at this point in the day, with nearly 3,500 contracts on the tape so far. Most active are the weekly 8/24 18- and 18.50-strike calls, where it looks like some of the activity is of the buy-to-open kind. If this is the case, speculators are betting on AMC shares to extend today's rally through the close next Friday, Aug. 24.

Cinemark Call Traders Stay Busy

Cinemark shares were off 1.8% at their intraday lows, but were last seen up 1.7% at $37.33. Nevertheless, the stock continues to be contained by its 120-day moving average, a staunch layer of resistance since mid-May.

cnk stock daily chart aug 16

Amid relatively low absolute volume, calls are accelerated -- running at almost double the expected intraday pace, and nearly 10 times the number of puts traded. This call-skew is just more of the same, with 2,708 calls currently open, in the 97th annual percentile, compared to fewer than 900 puts.

Some of this may be a result of shorts hedging against any upside risk. Short interest on Cinemark jumped 8% in the two most recent reporting periods to 12.32 million shares. This represents almost 12% of the security's available float, or 13.7 times the average daily pace of trading.

Imax Options Traders Target Bigger Losses

Imax stock is lagging its sector peers today, down 0.8% at $22.93 -- though its well off its session low of $22.25. The shares have been bouncing along a trendline connecting higher lows since late March, but are now staring up at familiar resistance in the $23.50 and $24.00 region, just above the year-to-date breakeven mark.

imax stock daily chart aug 16

Options traders appear to be betting on bigger losses for IMAX stock by week's end. The 984 puts traded so far today is six times what's average intraday amount. Most active is the August 23 put, where it looks like new positions are being purchased for a volume-weighted average price of $0.29. If this is the case, breakeven for the put buyers at the close tomorrow, Aug. 17, is $22.71 (strike less premium paid).

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