AMC Shares Down On The Week Despite Heavy Option Buying, Renewed Retail Interest

AMC Entertainment Holdings, Inc AMC is about the close the first week of 2022 trading down over 15%. AMC Apes and retail traders have shown no less interest to re-ignite the former gamma squeeze trade of 2021, but the stock isn't showing the upside yet, despite heavy options trading.

What Happened: AMC is closing the week down on the day to an already heavy week, even though trading activity has been quite robust. Moving over 40 million shares on the day, option traders have been buying up calls on AMC, moving over 390,000 options on the day with over 250,000 of them being calls and 140,000 puts (image below).

Of the roughly 390,000 contracts moved today, over 160,000 have been short dated (expiring today), so 40% of the flows today are either day trades being opened and closed, or closing transactions from prior options.

Why It Matters: Prior to trading on Friday, AMC had approximately 1.2 million calls and 835,000 puts, totalling just over 2 million contracts. Friday's volume represents approximately 19% of the total open interest.

Why It Matters: While there are decent flows up till the January and February monthly expiries, interest wanes heavily beyond that. This suggests the flows over this week are much more short-term focused, and few traders are willing to put up capital for longer-term bullish views, especially in the second half of 2022.

What's Next: While the stock may hold onto the $20s until the Jan. 21 expiry, looking further out to the January 2023 monthly expiry, the numbers aren't painting a bullish picture. The market is pricing in a 53% chance the stock closes at or below the $12 strike by the January 2023 expiry (image below).

This suggests the real money interest (bearish) is in stark contrast to the retail interest (bullish). It should be noted that outside the two weeks of gamma squeezes the stock experienced back in June 2021, AMC has lost over 68% of its value since the June spike highs, and has closed bearish two out of every three weeks since.

If retail traders find the stock isn't able to mount any gains this year, they may start moving capital over to other performing stocks like Ford Motor Co F, which is having a strong start to the new year (+14%).

On the other hand, if AMC can regain the $40 handle, this may spark a new wave of retail buying interest.