Patient bears score big profits in $AMC

Downside option positions have turned into big profits today for patient bears as AMC Theatres (AMC) made a new 52-Week low.

Last year on Sep. 16, Market Rebellion’s Unusual Activity Service flagged the purchase of 4,000 March $12 puts for $1.89 to $2.02 with shares at $12.07. This was clearly a new position, as open interest in the strike was a mere 26 contracts before that session began.

Those puts have traded for $9.60 today, more than 4.5 times their purchase price. The stock dropped 78.21% in the same time frame, illustrating how options can far outperform moves in their underlying shares.

Long puts lock in the price where a stock can be sold no matter how far it might drop, gaining value in a selloff with the potential for significant leverage. The contracts can be purchased either as an outright bearish bet or a hedge on a long-stock position.

AMC was last down on the session by 6.92% at $2.42, though above a new low for the shares of $1.95 made earlier. The U.S. based movie theater chain has seen its shares fall sharply over the last month as consumers practice “social distancing” to help curb the COVID-19 coronavirus.