Options Market Is a Key Suspect as AMC Swings, S&P 500 Slumbers

A once-obscure but increasingly influential dynamic in the options market may explain why U.S. equities have been so two-faced lately.

As meme mania rages, companies such as AMC Entertainment Holdings Inc. are whipsawing traders like never before. Yet at index level stocks are the most placid in years, with the S&P 500 Index posting its sleepiest stretch since 2017.

To the likes of Tallbacken strategist Michael Purves, it’s all about action in derivatives — or in the case of the index, lack of action.

Options dealers have been…