Options Trading: Let’s All Go to the Movies

Posted On March 13, 2018 2:03 pm

Yesterday’s article focused on how Netflix, despite its stellar past stock performance, might not be a great future investment. Today I want to look at one of the victims of Netflix’s success and how it may present a great opportunity for options trading.

Shares of movie theater chain AMC (AMC) have tumbled some 56% from their 2017 high, as the era of ‘Netflix and chill’ has made the age of “Let’s all go to the movies” an anachronism.

But the recent performance of Blank Panther, which has now grossed over $1 billion and counting, shows the death of movie theaters has been greatly exaggerated.

There is no doubt the that over the past decade, the combination of affordable high-definition flat screen TVs, the rise of streaming, and the explosion of high quality over-top high content has created a secular headwind against theaters.

When given a choice of unlimited binging from Netflix (or HBO, or HULU etc) at $10 per month or going to the multiplex at the mall at $10 per ticket, the choice is easy. Why spend the time and money of going to the movies when you can have an equal or even better experience at home for a fraction of the cost?

But like many trends, once there is a consensus that people will never do (or eat, visit, or wear) something ever again, that usually marks the bottom, and a possible turning point for that something to come back into favor.

 Related: Are Buybacks Distorting the Market? Here’s What You Need to Know. 

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Steve Smith

Steve Smith have been involved in all facets of the investment industry in a variety of roles ranging from speculator, educator, manager and advisor. This has taken him from the trading floors of Chicago to hedge funds on Wall Street to the world online. From 1987 to 1996, he served as a market maker at the Chicago Board of Options Exchange (CBOE) and Chicago Board of Trade (CBOT). From 1997 to 2007, he was a Senior Columnist and Managing Editor for TheStreet.com, handling their Option Alert and Short Report newsletters. The Option Alert was awarded the MIN “best business newsletter” in 2006. From 2009 to 2013, Smith was a Senior Columnist and Managing Editor for Minyanville’s OptionSmith newsletter, as well as a Risk Manager Consultant for New Vernon Capital LLC. Smith acted as an advisor to build models and option strategies to reduce portfolio exposure and enhance returns for the four main funds. Since 2015, he has worked for Adam Mesh Trading Group. There, he has managed Options360 and Earning 360, been co-leader of Option Academy, and contributed to The Option Specialist website.

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