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The meteoric rise in Mimi shares as AMC Entertainment Holdings Inc. and GameStop Corp. To unleash a wave of options trading, upending the traditional dynamics of the stock betting market.
The rush into stocks coincided with frantic trading in options – contracts that allow investors to bet on price movements in stocks or protect their investment portfolios. The once-obscure corner of the market this year has boomed like never before, as many new investors try their hand during the pandemic lockdowns.
Using complex contracts can be risky, but it has mushroomed into a feature of meme-mania this year. Some retail investors said they are drawn to the excitement of options trading, and are happy to take on higher risks for the potential of big rewards. They have used bets to bolster their positions, eager to ride the unrelenting momentum in stocks like GameStop and AMC.
Call options, which give investors the right to buy shares at a specified price in the future, have recorded particularly heavy trading. Internet traders and others have preferred them to make bullish bets in pursuit of huge wins. Its relatively low cost – with just one contract covering 100 shares – has drawn many into the market, with activity rising to fever pitch in recent sessions.
Last week, traders spent $11.6 billion on AMC-linked options contracts, more than traders spent on the SPDR S&P 500 ETF Trust, Invesco QQQ Trust and Tesla Inc. Taken together, according to Cboe Global Markets data. Options on those stocks are usually among the most popular in the market
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