$AMC call buyers find fast profits

AMC Entertainment (AMC) rallied higher today and bullish option traders turned some fast money on its momentum.

Just today on Aug. 24, Market Rebellion’s Unusual Activity Service found that 30,000 Weekly $45 calls, expiring this Friday, were bought for $0.44 to $2.73 with shares at $42.77. This was clearly fresh buying, as open interest in the strike was just 7,236 contracts before the activity appeared.

Those calls traded up to $7.95 less than half an hour later, at least 2 times their purchase prices. The stock rallied 12.42% in the same time period, a large move but nowhere near that of its options on a relative basis.

Long calls lock in the price where investors can buy a stock, letting them position for a rally at limited cost with the potential for significant leverage. They carry less risk than owning shares because the most that can be lost is the price of the options no matter how far the stock might fall.

AMC closed at $44.26 this afternoon, up 20.44% on the day.