AMC options volume jumps as box office weekend lifts cinema shares

AMC Entertainment shares rallied 25.6% to $2.44 on Monday afternoon as options trading in the cinema chain surged after a strong box office weekend and a better-than-expected earnings report, according to CNBC market data. More than 300,000 AMC options contracts had traded by the time of CNBC’s report, nearly five times the 30-day average and enough to place the stock among the 20 busiest single names by options volume.

The flow was concentrated in bullish contracts. CNBC reported that nearly 100,000 call options were bought, compared with 62,000 calls sold and fewer than 10,000 puts bought. Call options give holders the right, but not the obligation, to buy shares at a set price before expiration, so heavy call demand can reflect expectations of a further rise in the underlying stock or attempts to gain leveraged exposure to a short-term move.

The activity followed a weekend in which Christopher Nolan’s “The Odyssey” broke box office records, according to CNBC. AMC also reported earnings on Monday that exceeded analysts’ expectations and showed double-digit revenue growth, CNBC said.

AMC Chief Executive Adam Aron told CNBC’s “Squawk Box” that “America’s fascinated with The Odyssey this weekend.” Aron said AMC theaters drew 4.3 million guests globally over the weekend.

The rally extends a sharp advance in AMC shares over recent months. CNBC reported that Monday’s move brought the stock’s gain over an almost four-month period to just under 150%. The longer-term picture remains markedly different: AMC shares are still down 99% from their 2021 peak above $700, when the company became one of the best-known retail trading names during the meme-stock surge.

Options were central to that earlier episode. In heavily traded retail names, concentrated call buying can sometimes amplify moves in the shares as market makers who sell those calls buy stock to hedge their exposure. The scale and persistence of that effect depend on contract size, expiration, strike prices and the direction of the underlying shares.

More than $6 million in AMC options premium changed hands Monday, CNBC reported, with about $5.5 million linked to call contracts. By dollar value, the most heavily traded contracts were the $2 and $2.50 calls expiring Aug. 21, quoted at 39 cents and 20 cents, respectively. By contract volume, the most active trade was the $3 call with the same expiration, which CNBC said would require a 34% rise in the stock to break even.

Aron told CNBC that Hollywood’s release strategy has shifted after the pandemic period, when studios experimented with distribution models. “As a result of Covid there was a lot of experimentation but what Hollywood has learned over the last several years is people love to go to movie theaters,” he said. “Studio after studio is turning out movie after movie designed for the big screen.”

CNBC also noted renewed, though less intense, options activity in Imax. Imax shares were up 37% over the past year, but its call trading was not as active as AMC’s on Monday, according to CNBC.

This story draws on original reporting from CNBC.