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Short-term option bears took aim at Advanced Micro Devices, Inc. (NYSE:AMD) on Monday, with speculators focusing on the stock's August 4 put. A total of 8,097 contracts traded at this strike yesterday, and 98% of the volume crossed the tape at the ask price. Implied volatility on the option shot up 10.9 percentage points to 64.6%, and open interest rose overnight by 6,770 contracts (the biggest increase of any AMD strike). Based on this evidence, it's safe to assume that options players initiated a fresh batch of bearish bets on AMD.
This wave of pessimistic speculation coincided with a 6.2% rally in AMD shares. In fact, the stock peaked at $4.65 yesterday -- the exact site of the equity's July 18, 2013 52-week high. Year-to-date, AMD now sports a market-beating gain of about 23%.
In light of this positive price action, it's possible that AMD shareholders were purchasing protective puts yesterday. However, it's also entirely likely that the traders were simply placing speculative bets on another post-earnings plunge for the chip stock.
Specifically, AMD is due to report its second-quarter earnings after the market closes this Thursday, July 17. Currently, analysts are looking for a profit of 3 cents per share on $1.44 billion in sales. Unfortunately, despite beating consensus bottom-line estimates in six of its last eight quarterly reports, AMD tends to struggle post-earnings. Over the past two years, the stock has swallowed an average one-day drop of 5.9% after reporting -- and one week later, AMD averages a loss of 8%.
In today's session, however, shares of Advanced Micro Devices, Inc. (NYSE:AMD) are extending their positive momentum. At last check, the stock is up 2.6% at $4.76, after earlier peaking at $4.80 -- representing AMD's highest price in nearly two years.