AMC Options Trading Insights: Potential Gains and Risks

AMC Entertainment Holdings Inc. has new options trading for April 17, presenting investors with a covered call opportunity at a $4.00 strike price. This could yield a total return of 20.87%, but with volatility considerations.

Date: 20-02-2025

AI Rating: 6

Earnings Potential
Investors in AMC Entertainment Holdings Inc. (Symbol: AMC) are currently evaluating new options that have begun trading. The highlighted call contract at the $4.00 strike price offers a current bid of 17 cents, presenting a potential strategy for investors who purchase shares at $3.45. The opportunity for a total return of 20.87%, excluding dividends, is noteworthy.

Covered Call Strategy
By selling-to-open that call contract, investors commit to selling their shares should the stock price reach $4.00. Given that this price represents approximately a 16% premium over the current trading price, there is potential upside, but also the risk that the contract could expire worthless—allowing shareholders to retain their stock and premium collected.

Volatility Considerations
The implied volatility of the call contract is noted at a high 130%, indicating substantial uncertainty and potential price swings. In contrast, the actual trailing twelve-month volatility is at 97%. This discrepancy suggests that while options traders expect heightened activity, actual performance has been somewhat more stable.

Investor Evaluation
The analytical data suggests that there is a 50% chance the covered call contract might expire worthless, translating to an additional 4.93% return—the benefit of which could annualize to 32.14%. Investors will need to closely monitor market performance and AMC's fundamentals to mitigate risks associated with high volatility and uncertain pricing outcomes.

Stocks: AMC