Wall Street traders are turning to a complex bearish options strategy in order to bet against shares of AMC Entertainment Holdings Inc and other stonks or shares popular with retail investors, ReutersreportedMonday.
What Happened: “Bear put spread” is a strategy where an investor purchases a long put with a higher strike price and another short put with a lower strike price. Maximum profit using this strategy is equivalent to the difference between two strike prices minus the net costs associated with the options.
Options trading data from Trade Alert, analyzed by Reuters, indicates that complex trades which deploy strategies such as “put spreads” are on the rise.
These trades usually made by professional investors accounted for 22% of daily AMC trades on average this week compared with 13% for the month of May.
However, the majority of options trades were still made by retail investors as only about 10% to 15% of overall daily AMC options volume this week was traded in blocks larger than 100 contracts, which purportedly is a size linked with professional investors.
Why It Matters: In the past week AMC shares have risen 83.4%; the stock has skyrocketed 2,160% on a year-to-date basis.
Other stonks such asGameStop CorpGME 0.09%andBlackBerry LtdBBhave run up 11.87% and 32.67%, respectively, in the same time period.
Last week, AMC and GameStop short-seller lossesswelled up to $12 billionon a year-to-date basis.
In AMC alone, YTD losses of short sellers rose up to $5.22 billion on a mark-to-market basis.
Heading into a fresh week of trading, BlackBerry and AMC remain themost discussed names on r/WallStreetBets, the Reddit forum known for carrying out short squeezes.
Price Action: On Friday, AMC shares closed nearly 6.7% lower at $47.91 and fell another 8.7% in the after-hours session to $43.74.