As speculative trading activity in the failing movie theatre gathered traction, AMC Entertainment, the meme stock that recently astounded Wall Street, soared double digits on Monday.
Following an 80 per cent gain the previous week, AMC stock rose as much as 25% on Monday. On Reddit’s notorious WallStreetBets community, AMC has dethroned GameStop as the star, with retail traders urging one other to pile into stocks and call options.
On Monday, AMC stock finished 14.8 per cent higher at $55.
Financial instrument refers to a call option that allows an investor to purchase a stock at a specific time and specific price.
Following a 160 per cent rise in May, AMC has risen more than 110 per cent in June, bringing its 2021 surge to about 2,500 per cent. During the GameStop trading frenzy, the stock has soared over its January high, achieving an intraday high of $72.62 last week.
As the momentum grew, other meme stocks rose as well. The stock of Bed Bath & Beyond rose 7.2 per cent, while BlackBerry rose 13.8 per cent. GameStop increased their stock by 12.7 per cent.
In the midst of the frenzied trading, TD Ameritrade announced on Sunday that margin requirements on AMC and GameStop had been raised to 100%, requiring investors to acquire all equities with cash. Additional restrictions for beginning transactions on AMC options that expire on Friday may be implemented, according to the trading business.
The hashtags ′′#NakedShorts” and ′′#NakedShorting” were trending on Twitter Monday and over the weekend, referring to the increased short interest in AMC. Naked shorting is an unlawful short-selling activity in which a stock’s short interest exceeds the number of tradable shares in the market due to differences in paper and electronic trading methods.
According to statistics from S3 Partners, AMC has roughly 18% of its float shares sold short, compared to around 5% for the typical U.S. firm. According to S3 statistics, short sellers betting against AMC lost $2 billion last week.
On Monday it was announced buy the Securities and Exchange Commission that it is closely monitoring the chaotic activity to see whether there have been “any market disruptions, manipulative trading, or other misbehaviour.”
On CNBC’s “Squawk Box,” Interactive Brokers Chairman Thomas Peterffy said, “Shorting these companies is incredibly enticing, but unless you have a lot of liquid assets, you should avoid it since these prices might reach inconceivable highs before settling down to a realistic value, and you may have to cover on the high point.”
“Stocks always approach their underlying values over time,” Peterffy continued, “which in this instance is much, much lower.”
Last week, AMC took advantage of the big rise by selling 20 million shares in two separate transactions, netting roughly $800 million. CEO Adam Aron has indicated that he may sell up to 25 million additional shares.