AMC Stock: Here's How To Trade It Right Now

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AMC stock has been on a wild ride over the last year, but it could be a very profitable ride for those who know how to trade it. The pandemic and resulting lockdowns were especially rough on businesses that relied on groups of people gathering indoors. Cruises, sports, and live entertainment were virtually shut down, and your favorite restaurants were left to scramble to stay afloat on just take-out.

Movie theaters were shuttered, too, and AMC Entertainment Holdings Inc. (NYSE: AMC) was among the casualties. Shares of AMC fell by nearly 70% amid the start of the pandemic last spring.

But then something curious happened. AMC stock took off like a rocket. The combination of a short squeeze and renewed optimism about the economy recovering made AMC a meme stock in January. That pushed AMC up over 800% higher. It's currently up about 400% on the year, despite another 70% crash between January and February and a 35% dive in March.

The constant ups and downs might be gut wrenching for investors who are holding the stock. But this is prime territory for traders who know how to get in and out with profits.

How to Trade AMC Stock

Its earnings on May 6 were the latest catalyst. Shares fell by around 20% leading up to the earnings report, only to rebound 35% since May 6.

Despite predictably poor earnings considering theaters were mostly still closed last quarter, the coming reopening has lifted prices again. Investors are not sure what to do with the stock. Did the stock already price in future business? Or was the price spike just a distraction for a stock that is now on the road to recovery?

Money Morning Chief Investment Strategist Shah Gilani thinks the stock is about to respond to the reopening and move higher. Unlike all the hype that stocks like AMC had in January, real earnings are likely to grow now as real business improves.

Of course, it is always hard to invest with possibility, albeit unlikely, of future government mandated restrictions should COVID-19 cases rise again. That's why Shah is recommending a lower-risk play on AMC using a call spread.

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Disclaimer: Any performance results described herein are not based on actual trading of securities but are instead based on a hypothetical trading account which entered and exited the suggested ...

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