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Option Brief: Puts were clearly the options of choice on Advanced Micro Devices, Inc. (NYSE:AMD) Monday, with roughly 23,000 contracts crossing the tape -- nearly three times the typical daily pace. As a point of comparison, fewer than 7,200 calls changed hands. The $4 level was in focus again, but unlike last week's option traders, one speculator bet on the stock to extend its decline underneath this overhead mark.
Shortly before noon on the Chicago Board Options Exchange (CBOE), one massive block of 14,550 July 4 puts changed hands at the ask price of $0.69 apiece. Implied volatility rose 2.3 percentage points at the transaction, and open interest soared overnight. In other words, it seems safe to assume that new bearish positions were initiated for a net debit of about $1 million (number of contracts, times premium paid, times 100 shares per contract). This amount also represents the full potential risk on the play.
Technically speaking, this bearish bias toward Advanced Micro Devices, Inc. (NYSE:AMD) isn't too surprising, considering the stock's recent price struggles. In fact, since hitting its Jan. 15 high of $4.60, the shares have fallen 19% -- largely due to a weak revenue forecast issued in late January. What's more, the equity surrendered a perch atop its 200-day moving average during this slide, and a recent rally into this psychologically significant trendline -- currently located at $3.76 -- was quickly rejected. In today's session, the stock is attempting to regain a portion of these losses, adding 1.6% right out of the gate to trade at $3.73.