First week of April 2023 Options trading for AMC Entertainment Holdings
Investors in AMC Entertainment Holdings Inc. (Symbol: AMC) saw new options start trading this week, for the April 2023 expiry. One of the key data points that go into the price that an option buyer is willing to pay is the time value, so with 120 days to expiration, new trade contracts represent a possible opportunity for put or call sellers to earn a higher premium than would be available for contracts with closer expiration. At Stock Options Channel, our YieldBoost formula scoured the AMC Options Channel for April 2023 New Contracts and identified one particularly attractive put and one call.
The put contract at the strike price of $2.00 has a current bid of 55 cents. If an investor were to sell to open this put contract, they agree to buy the stock at $2.00, but will also collect the premium, placing the cost base of the stock at $1.45 (before brokerage commissions ). For an investor already interested in buying shares of AMC, this could represent an attractive alternative to paying $4.53/share today.
Since the $2.00 strike represents about a 56% discount to the current stock price (in other words, it’s out of the money by that percentage), it’s also possible that the sales contract expires worthless. Current analytical data (including Greeks and implied Greeks) suggests that the current chance of this happening is 95%. Stock Options Channel will track these odds over time to see how they change, by posting a table of these numbers on our website under the contract detail page for that contract. If the contract expires worthless, the premium would represent a return of 27.50% on the cash commitment, or 83.67% annualized – at Stock Options Channel, we call this the Yield increase.
Below is a graph showing AMC Entertainment Holdings Inc.’s past twelve month trading history, and highlighting in green where the $2.00 strike falls in relation to that history:
On the call side of the options chain, the call contract at the strike price of $11.00 has a current bid of 12 cents. If an investor were to buy AMC stock at the current price level of $4.53/share and then sell to open this call contract as a “covered call”, they are committing to selling the stock at 11 $.00. Assuming the call seller will also collect the premium, this would result in a total return (excluding dividends, if any) of 145.47% if the stock is called at the April 2023 expiry (before brokerage commissions) . Of course, a lot of upside could potentially be left on the table if AMC’s stock really does soar, which is why it becomes important to look at AMC Entertainment Holdings Inc’s past 12-month trading history. , as well as study the fundamentals of the business. Below is a chart showing AMC’s past twelve month trading history, with the $11.00 strike highlighted in red:
Considering that the strike price of $11.00 represents a premium of approximately 143% to the current stock price (in other words, it is out of the price by that percentage), it It is also possible for the covered call contract to expire worthless, in which case the investor would keep both his shares and the premium collected. Current analytical data (including Greeks and implied Greeks) suggests that the current chance of this happening is 87%. On our website, under the contract detail page for that contract, the Stock Options Channel will track those odds over time to see how they change and publish a table of those numbers (the option contract’s trading history will be also plotted). If the covered call expires worthless, the premium would represent a 2.65% increase in incremental return to the investor, or 8.06% annualized, what we call the Yield increase.
The implied volatility in the example sell contract is 259%, while the implied volatility in the example buy contract is 146%.
Meanwhile, we calculate the actual volatility for the last twelve months (considering the closing values of the last 252 trading days as well as today’s price of $4.53) at 119%. For more put and call options contract ideas worth considering, visit StockOptionsChannel.com.
• SPFR yield since the beginning of the year
• Institutional holders of the IAUF
• F Average annual return
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
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