"Meme Stocks" Are Popular Again: What to Make of AMC

AMC stock is trading at new record highs amid another short squeeze

Managing Editor
Jun 2, 2021 at 12:45 PM
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Just when you thought we had returned to some semblance of normalcy, "meme stocks" are back. Instead of GameStop (GME), this time its AMC Entertainment Holdings Inc (NYSE:AMC) leading the charge, the stock last seen up 38% to trade at $44.35 and earlier trading at a new record high of $49.40.  Short sellers of the Reddit stock were dealt a crushing blow over the weekend, after AMC raised more than $230 million in share sale to Mudrick Capital, which apparently sold those shares immediately at profit.

The movie theater chain is capitalizing on the social media-driven trading frenzy, launching an initiative to communicate with retail investors and enticing them with free popcorn and exclusive screenings as a reward for their involvement. Amidst this renewed popularity, options traders are coming out in droves.

AMC Stock Chart

More specifically, 1.3 million calls have crossed the tape so far today, volume that's quadruple the average intraday amount and double the number of puts traded. The most popular is the June 40 call, but there also seems to be some put spread activity occurring at the June 30 and 31-strike puts.

A few notes about AMC that aren't usually covered by the mainstream outlets. First, the stock's 14-Day Relative Strength Index (RSI) sits up at an absurd 93.6 at the moment, at levels of "overbought" that mimics the initial late-January Wallstreetbets craze. Yet at the same time, a whopping 181% of AMC's total available float is sold short. So while there's plenty of room left for a continued short squeeze, investors ought to be eyeing that RSI carefully if they want to join the Reddit fun.

Lastly, the security's Schaeffer's Volatility Scorecard (SVS) ranks at 74  out of a possible 100, implying the stock tends to outperform these volatility expectations -- a boon for option buyers. 

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