Mike Khouw's AMC Entertainment Trade

On CNBC's "Options Action," Mike Khouw spoke about options strategies investors could use for AMC Entertainment Holdings Inc (NYSE:AMC). The company is going to report earnings this week and the options market is expecting a move of around 14% in either direction. The stock normally moves around 8%.

Because of high implied volatility, Khouw wants to sell credit spreads in the name. He advised bearish investors to sell the April 1, $5.5/$6.5 call spread for a credit of 40 cents. The trade starts to lose money above $5.90 and it can maximally lose 60 cents. For bullish investors, Khouw recommended the sale of the April 1, $5.5/$4.5 put spread for 50 cents. The trade breaks even at $5 and it can maximally lose 50 cents.

Carter Worth of Cornerstone Macro shared his technical analysis for the stock. When the stock breaks out above the trendline and it overshoots like AMC did, it typically trades back to the trendline, said Worth. That implies a decline to around $4.
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