AMC call buyers get ticket to profits

AMC Entertainment has been falling for weeks, but bullish traders turned some fast money after betting on a bounce today.

Just yesterday, Investitute’s market scanners detected the purchase of 1,480 July $26 calls for $0.40 to $0.45 with shares at $23.70. This represents fresh buying, as volume was well above the strike’s open interest of 630 contracts.

Today those calls traded for $0.85, doubling in value just one session later. The stock rose less than 5.3 percent in the same time, showing how quickly options can outperform their underlying shares by a large margin.

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 rose 5.56 percent to $24.70 today. The movie-theater chain has dropped sharply despite beating quarterly earnings and revenue estimates on May 8 amid concerns that it may be losing business to video-streaming competitors.