Options Bulls Entertain More Upside for AMC

The sentiment surrounding AMC has been overwhelmingly bearish

by Lillian Currens

Published on Apr 29, 2020 at 1:32 PM
Updated on Jun 24, 2020 at 10:16 AM

Movie theater giant AMC Entertainment Holdings Inc (NYSE:AMC) is on a roll this week, snatching up multiple one month highs and on its way to its biggest weekly win in over 20 years, up 67.6% so far. The equity is extending that rally into today, up 23.2% at $5.10, amid news that it will no longer play Universal Studio films in any of its theaters. The decision follows comments from the CEO of NBCUniversal -- a subsidiary of Comcast (CMCSA) -- that the company plans on releasing its films in theaters and direct-to-home formats simultaneously. The decision will go into effect as soon as its theaters -- shuttered by the coronavirus pandemic -- reopen. 

Options traders are coming out in droves today, with 39,000 calls and 21,000 puts across the tape so far -- four times the intraday average. The two most popular contracts are the weekly 5/1 6-strike, and monthly 1/21 8.45-strike calls, with positions being opened at the former. On the other end of the spectrum, the December 2 put is seeing some action today, with positions being opened there. 

Today's options activity is outside the norm. In fact, in the last 10 weeks, 1.64 puts were picked up for every call at the International Securities Exchange (ISE), Cboe Exchange (CBOE), and NASDAQ OMX PHLX (PHLX). This ratio sits higher than all but 2% of readings from the past year, too, suggesting a much healthier appetite for long puts of late. 

The options pits aren't the only place where pessimism is lurking -- analyst sentiment shows that of the 11 covering the stock, seven consider it a tepid "hold," with not a single "buy" rating to be seen. Adding to this, the consensus 12-month price target of $3.10 is a 40.4% discount to current levels. 

Short sellers have been piling on the movie concern, too, with short interest up 27.4% in the last reporting period. The 24.19 million shares sold short represent an eyebrow-raising 47.3% of AMC's available float, and would take nearly a week to cover at the stock's average daily pace of trading. 


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