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AMC Set for More Volatility as Options Trading Heats Up

AMC Entertainment shares trade higher ahead of what's expected to be another volatile week as Wall Street traders tee up options bets against another big rally.

AMC Entertainment  (AMC) - Get Free Report was moderately higher Monday ahead of what's expected to be another volatile week of trading in the movie-theater-chain-turned-meme-stock-poster-child as Wall Street traders tee up bets against another massive retail investor-driven rally.

AMC shares were up 11.9% at $53.61 after Reuters reported that Wall Street traders and investors are teeing up bets in the options market that would limit losses should retail traders continue their collective effort to push shares of AMC and other meme stocks higher.

A Reuters analysis of options data and interviews with market participants, including a Wall Street banker and a fund manager with $30 billion in assets, showed that some institutional investors have ramped up complex options trades that let them bet the shares will fall.

The so-called bear put spread, a bearish options strategy common among more sophisticated Wall Street investors and traders that also limits profits, comes as AMC continues to register eye-popping gains amid a frenzy of less-sophisticated retail investor buying driven by little more than the promise the shares will increase in value.

Indeed, AMC has taken over the meme-stock spotlight held at one time by video game retailer GameStop  (GME) - Get Free Report, which became a household name back in January when its shares soared amid chatter among retail investors on message boards like Reddit to bid the stock higher.

In the case of the bear put spread, its increased use now, which has not been previously reported, shows how Wall Street is looking for ways to profit off the unprecedented rise of retail trading, but treading carefully after some high-profile funds got buffeted earlier this year.

On the brink of bankruptcy only a few months ago, AMC is now the darling of retail traders, with this year’s 2,200% gain ranking as the most of any stock in the Russell 3000 Index. The stock’s surge has enabled the company to sell equity and shore up its shaky balance sheet.

AMC shares ended the trading day Friday down nearly 7% even as CEO Adam Aron made the case for another round of capital raising that many view as a dilution of shares. 

Aron himself has countered that, noting that the 12 million additional shares AMC is looking to sell "... is not mindless dilution" but rather a "... very smart raising of cash so that we can grow this company." 

AMC shares are up almost 2,600% year to date.

Meme stock grandfather GameStop, meantime, is expected to report a quarterly loss of 70 cents a share on sales of $1.2 billion when it reports earnings on Wednesday. At last check, GameStop shares were up 4.23% at $260.11. 

GameStop is up more than 1,400% year to date.